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.■•CILITY 

THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


■vi 


^-:.  ^ 


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HORNBOOK  CASE  SERIES 


ILLUSTRATIVE    CASES 


ON  THE  LAW  OF 


BILLS  AND  NOTES 


By  WM.  UNDERHILL  MOORE 


Ml 


Professor  of  Law 
University  of  Wisconsin  Law  School 


A  COMPANION  BOOK 

TO 

NORTON  ON  BILLS  AND  NOTES  (4th  Ed.) 


ST.  PAUL 
WEST    PUBLISHING    CO. 

1914 


T 

MS  IS  b 

19/4- 


COPYKIGHT,     1914 
BY 

WEST  PUBLISHING  COMPANY 
(MooKE  Cases  B.&  N.) 


8 


li. 


THE  HORNBOOK   CASE  SERIES 


It  is  the  purpose  of  the  publishers  to  supply  a  set  of  Illustrative 
Casebooks  to  accompany  the  various  volumes  of  the  Hornbook  Series, 
to  be  used  in  connection  with  the  Hornbooks  for  instruction  in  the 
classroom.  The  object  of  these  Casebooks  is  to  illustrate  the  prin- 
ciples of  law  as  set  forth  and  discussed  in  the  volumes  of  the  Horn- 
book Series.  The  text-book  sets  forth  in  a  clear  and  concise  manner 
the  principles  of  the  subject;  the  Casebook  shows  how  these  princi- 
ples have  been  applied  by  the  courts,  and  embodied  in  the  case  law. 
With  instruction  and  study  along  these  lines,  the  student  should  se- 
cure a  fundamenta4  knowledge  and  grasp  of  the  subject.  The  cases 
on  a  particular  subject  are  sufficiently  numerous  and  varied  to  cover 
the  main  underlying  principles  and  essentials.  Unlike  casebooks 
prepared  for  the  "Case  Method"  of  instruction,  no  attempt  has  been 
made  to  supply  a  comprehensive  knowledge  of  the  subject  from  the 
cases  alone.  It  should  be  remembered  that  the  basis  of  the  instruc- 
tion is  the  text-book,  and  that  the  purpose  of  these  Casebooks  is  to 
illustrate  the  practical  application  of  the  principles  of  the  law. 

West  Publishing  Company. 
(lii)* 


TABLE  OF  CONTENTS 


INTRODUCTION 

Page 

I.    Distinction  Between  Assignal)ility  and  Negotiability 1, 

II.  Indicia  of  Negotiability — Nonnegotiable  Bills  and  Notes 4 

negotiable  bills  and  notes  and  their  formal  and 
essent:ial  requisites 

I.    Order  Contained  in  a  Bill 10 

II.     Promise  Contained  in  a  Note 13 

III.     Certainty  as  to  tbe  Terms  of  the  Order  or  Promise 22 

IV.     Payment  of  Money  Only 44 

V.     Specification  of   Parties 66 

VI.     Delivery   84 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE 

I.  Acceptance  According  to  Tenor 92 

II.  Wbo  may  Accept 93 

III.    Implied  Acceptance 93 

IV.     Acceptance  on  Separate  Paper 100 

V.     Parol  Acceptance 103 

INDORSEMENT 

I.  Formal  Requisites 107 

II.    Indorsement  in  Blank  and  Special  Indorsement 112 

III.  Indorsement  without  Recourse,  Conditional,  and  Restrictive  Indorse- 

ments    114 

IV.     Irregular  Indorsements 123 

NATURE  AND  LIABILITIES  OF  PARTIES 

I.    Acceptor  and  Maker 129 

II.     Drawer  and  Indorser 134 

III.    Accommodation  Parties 136 

TRANSFER 

I.    Delivery  Without  Indorsement  of  Instrument  Payable  to  Order 144 

II.    Right  to  sue 14S 

DEFENSES 

I.    Real  Defenses 1^2 

II.  Personal  Defenses 1ST 

III.  Discharge   190 

MooKE  Cases  B.&  N.  (v) 


Vi  TABLE  OF  CONTENTS 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE 

Page 

I.     Value   206 

11..     Notice 212 

III.     Presumptions  and  Burden  of  Proof 223 

PRESENTMENT  AND  NOTICE  OF  DISHONOR 

I.     Presentment  225 

II.     Notice  of  Dishonor 244 

III.     When  Presentment  or  Notice  of  Dislionor  Excused,  and  When  Due 

Diligence  Dispensed  With 250 

CHECKS 

I.    Presentment  and  Notice  of  Dishonor — Effect  of  Delay 255 

II.     CerUfication   257 


TABLE     OF  CASES 


Page 

Alexander  &  Co,  v.  Ilazelrlgg 163 

Almy  V.  Winslow 72 

American    Exoh.    Nat.    Bank    v. 
American  Hotel  Victoria  Co 248 

Barrow  v.  Bispham 2 

Baxendale  v.  Bennett 184 

Blaine,  Gould  &  Short  v.  Bourne 

&  Co 117 

Blenn  v.  Lyford 194 

Boehm  v.  Garcias 92 

Born  V.  First  Nat.  Bank 2.59 

Boston  Steel  &  Iron  Co.  v.  Steuer  179 
Brooklyn  City  &  N.  R.  Co.  v.  Na- 
tional Bank  of  the  Republic...  206 

Burbridge  v.  Manners 190 

Burch  V.  Daniel 112 

Central   Trust   Co.   v.   First   Nat. 

Bank    110 

Clark  V.  Pease 152,  187 

Columbian  Banking  Co.  v.  Bowen  235 
Commercial  Nat.  Bank  of  Syracuse 

V.  Zimmerman 238 

Cooke  V.  Colehan 24 

Coolidge  V.  Payson 100 

Cruchley  v.  Clarance. 179 


Dana  v.  Sawyer. 
Drum  V.  Drum. , 


243 
169 


Epler  V.  Funk 114 

Fairchild  v.  Ogdensburgh,  C.  &  R- 

R.   Co 69 

Farmers'  Nat.  Bank  of  Annapolis 

V.  Veuner 129 

Far  Rockaway  Bank  v.  Norton. . .  127 

First  Nat.  Bank  v.  Leach 257 

First  Nat.  liank  v.  Lightner 27 

First  Nat.  Bank  v.  Slaughter 56 

Forward  v.  Thompson 71 

Gay  V.  Rooke 14 

Geo.   Alexander  &  Co.  v.   Hazel- 
rigg 163 

MooBE  Cases  B.&  N.  (vii) 


Page 

Gifford  V.  Hardell 229 

Gilley  v.  Ilarrell 7 

Goodman  v.   Simonds 212 

Gordon    v.     Lansing    State    Sav. 

Bank    74 

Gordon  v.   Levine 2.32 

Goupy  V.  Harden 225 

Grange  v.  Reigh 231 

Green  v.  Gunsten 165 

Grocers'    Bank    of   City    of    New 

York  V.  Penfleld 138 

Haines  v.  Dubois 107 

Hamilton  v.  Spottiswoode 11 

liannum  v.  Richardson 134 

Harger  v.  Worrall 142 

Hart  V.  Smith 227 

Hatch  V.  First  Nat.  Bank 49 

Hays  V.  Ha  thorn 149 

Heenan  v.  Nash 93 

Hodges  V.  Shuler 53 


Hogue  V.  Williamson. 


47 


Hook  V.  Pratt 121 

Hussey  v.  Winslow 13 

Huyck  V.  Meador 16 

Ingham  v.  Primrose 203 


Jarvis  v.  Wilson 

Jones  V.  Council  Bluffs  Branch  of 
State  Bank  of  Iowa 


Kelley  v.  Hemmingway. 
Kerr  v.  Anderson 


Lancaster  Nat.  Bank  v.  Taylor. 

Leader  v.  Plante 

Leask  v.  Dew 

Linn  v.  Horton 

Little  V.  Slackford 

Lowe  V.  Bliss 


Marling  v.  Jones 

Mauran  v.  Lamb 

Miller  v.  Finley 

Morrison  v.  McCartney. 


o 

105 

22 
223 

144 

24 

200 

246 

11 

63 

139 

148 
189 
255 


VUl 


TABLE    OF    CASES 


Page 
National  Exch.  Bank  of  Albany  v. 

Lester 171 

National  Park  Rank  of  New  York 

V.  Fourth  Nat.  Bank 131 

National  Park  Bank  of  New  York 

V.  Ninth  Nat.  Bank 131 


Osborn  v.  Hawley. 


55 


Peacock  v.  Rhodes 1,  112 

Petit  V.  Benson 92 

Peto  V.  Reynolds 67 

Phelps  V.  Vischer 123 

Piukham  v.  Macy 244 

Price  V.  Sharp 196 

Putnam  v.  Crymes 7 

Reed  v.  Spear 250 

Rider  v.  Taintor 113 

Robertson  v.  Kensington 115 

Rochester  &  C.  Turnpike  Road  Co. 

V.   Paviour 218 

Ruff  V.  Webb 10 

Schwartzman  v.  Post 191 

Seaboard  Nat.  Bank  v.   Bank  of 

America 78 

Sears  v.  Lantz  &  Bates 108 


Page 

Smith  V.  Clarke 113 

Smith  V.  Crane 65 

Smith  V.  Dotterweich 87 

Smith  V.  Kendall 4 

Smith  V.  Myers 58 

Stagg  V.  Pepoon 18 

Starr  v.  Starr 188 

Taylor  v.  Dobbins 66 

Thompson  v.  Clubley 136 

Thompson  v.  Sloan 44 

Thorp  V.  Mindeman 36,  63,  109 

Torbert  v.  Montague 253 

Valley  Nat.  Bank  of  Chambers- 
burg  V.  Crowell 54 

Venner  v.  Farmers'  Nat.  Bank  of 
Annapolis  129 

Westberg   v.    Chicago    Lumber   & 

Coal  Co 95 

White  V.  Smith 32 

Wisconsin  Yearly  Meeting  of  Free- 
will  Baptists  V.  Babler 34,  56 

Wordeh  v.  Dodge 26 

Worth  V.  Case 84 

Young  V.  American  Bank 19,  21 


HORNBOOK  CASES 

ON 

BILLS  AND  NOTES 


INTRODUCTION 
I.  Distinction  Between  Assignability  and   Negotiability  ^ 


PEACOCK  V.  RHODES. 
(Court  of  King's  Bench,  17S1.     2  Doug.  633.) 

In  an  actionjapon  an  inland  bill  of  exchange,  which  was  tried  before 
\Villes,  Justice,  at  the  last  Spring  Assizes  for  Yorkshire,  a  verdict,  by 
consent,  was  found  for  the  plaintiff,  subject  to  the  opinion  of  the  court 
on  a  special  case,  stating  the  following  facts  : 

"The  bill  was  drawn  at  Halifax,  on  the  9th  of  August,  1780,  by  the 
defendants,  upon  Smith,  Payne  &  Smith,  payable  to  William  Ingham, 
or  order,  31  days  after  date,  for  value  received.  It  was  indorsed  by 
William  Ingham,  and  was  presented  by  the  plaintiff  for  acceptance  and 
payment,  but  both  were  refused,  of  which  due  notice  was  given  by  the 
plaintiff'  to  the  defendants,  and  the  money  demanded  of  the  defendants. 
The  plaintiff,  who  was  a  mercer  at  Scarborough,  received  the  bill  from 
a  man  not  known,  who  called  himself  William  Brown,  and,  by  that 
name,  indorsed  the  bill  to  the  plaintiff,  of  whom  he  bought  cloth,  and 
other  articles  in  the  way  of  the  plaintiff''s  trade  as  a  mercer,  in  his  shop 
at  Scarborough,  and  paid  him  that  bill,  the  value  whereof  the  plaintiff' 
gave  to  the  buyer  in  cloth  and  other  articles,  and  cash,  and  small  bills. 
The  plaintiff  did  not  know  the  defendants,  but  had  before,  in  his  shop, 
received  bills  drawn  by  them,  which  were  duly  paid.  William  Ingham, 
to  whom  the  bill  was  payable,  indorsed  it ;  John  Daltry  received  it  from 
him,  and  indorsed  it;  Joseph  Fisher,  received  it  from  John  Daltry;  and 
it  was  stolen  from  Joseph  Fisher,  at  York,  (without  any  indorsement  or 
transfer  thereof  by  him,)  along  with  other  bills  in  his  pocket-book, 
whereof  his  pocket  was  picked,  before  the  plaintiff  took  it  in  payment 
as  aforesaid.    The  plaintiff  declared  as  indorsee  of  Ingham."  ' 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§  2-7. 

2  Tlie  arguments  of  counsel  are  omitted. 

MooBE  Cases  B.&  N. — 1 


2  INTRODUCTION 

Lord  MaxsfiKld.  I  am  glad  this  question  was  saved,  not  for  any 
difficult}'  there  is  in  the  case,  but  because  it  is  important  that  general 
commercial  points  should  be  publicly  decided.  Th^hd^er  of_aj3iU  of 
exchange,  or  priiiiii>>or\-  note,  is  not  to  be  considered  in  the  light  of  ah 
a^L;:ioc  oi  the  payee.  Anassi^Tieejiiust  take_tTie__thing.  assign^,  sub- 
ject lo  all  ihc  equity  to  which  the  original  party  was  subject.  If  this 
rule  applied  to  bills  and  promissory  notes,  it  would  stop  their  currency. 
The  law  is  settled,  that  a  holder,  coming  fairly  by  a  bill  or  note,  has 
nothing  to  do  with  the  transaction  between_the  original  parties;  unless," 
perhaps,  in  the  single  case,  (wliich  is  a  hard  one,  Eut  has  been  deter- 
mined.) of  a  note  for  money  won  at  play.  Vide  Lowe  v.  Waller,  T. 
Jl  Geo.  Ill,  2  Doug.  736.  I  see  no  diiference  between  a  note  indorsed 
blank,  and  one  payable  to  bearer.  They  both  go  by  delivery,  and  pos- 
session proves  property  in  both  cases.  The  question  of  mala  fides  was 
for  the  consideration  of  the  jury.  The  circumstances,  that  the  buyer 
and  also  the  drawers  were  strangers  to  the  plaintiff,  and  that  he  took 
the  bill  for  goods  on  which  he  had  a  profit,  were  grounds  of  suspicion, 
very  fit  for  their  consideration.  But  they  have  considered  them,  and 
have  found  it  was  received  in  the  course  of  trade,  and,  therefore,  the 
case  is  clear,  and  within  the  principle  of  all  those  Mr.  Wood  has  cited, 
from  that  of  Miller  v.  Race,  1  Burrows,  452,  downwards,  to  that  de- 
termined by  me  at  nisi  prius. 

The  postea  to  be  delivered  to  the  plaintiff. 


BARROW  v.  BISPHAM. 
(Supreme  Court  of  New  Jersey,  1829.     11  N.  J.  Law,  110.) 

Ford,  J.^  The  defendant  moves  to  set  aside  a  judgment  entered 
against  him  in  this  case,  on  bond  and  warrant  of  attorney,  upon  an 
allegation  that  the  bond  was  obtained  from  him  bx_.fraud,  and  for  a 
consideration  that  has  failed.  The  bond  and  warrant  were  give  orig- 
inally to  Benjamin  AlcGinnis,  and  assigned  by  him  to  James  Barrow, 
the  plaintiff.     *     *     * 

The  counsel  for  the  plaintiff  insists  that  no  fraud  between  the  orig- 
inal parties  can  be  set  up  against  Jamej  Barrow,  the  assignee,  who  be- 
came a  bona  fide  holder,  without  notice,  for  valuable  consideration,  and 
against  whom  no  fraud  is  proved  or  imputed.  In  support  of  this  doc- 
trine, he  cites  Somes  v.  Brewer,  2  Pick.  (Mass.)  184,  13  Am.  Dec.  406, 
Fletcher  v.  Peck,  6  Cranch,  133,  3  L.  Ed.  162,  and  Parker  v.  Patrick, 
5  Term  R.  175.  The  two  former  cases,  instead  of  relating  to  bonds,  or 
to  a  chose  in  action,  refer  exclusively  to  transfers  of  real  estate.  If  one 
obtain  a  deed  for  land  by  fraud  and  imposition  on  the  owner,  and  aft- 
erwards convey  the  same  to  a  purchaser,  having  no  notice  of  the  fraud, 


3  Only  a  portion  of  the  opinion  is  printed. 


DISTINCTION    BETWEEN    ASSIGNABILITY    AND    NEGOTIABILITY  3 

such  purchaser  will  hold  against  the  original  owner.     The  reason  of 
those  cases  is  that  the  title  to  land,  which  passes  by  solemn  livery  of 
seisin  or  conveyances  amounting  to  it,  would  be  universally  endangered, 
if  fraud  might  be  set  up  in  any  remote  link  of  a  long  chain  of  title  (or 
succession  of  owners),  through  whom  it  had  passed  in  coming  to  the 
last  purchaser.    The  cases  have  nothing  to  do  with^the  assignment  of  a 
chose  in  action,  which  is  gove'rneg  py  widely  difTerentrrulesT  The  case 
olTarker  V.  Patrick,  only  shows  that  goods,  taken  by  a  pawnbroker  in 
the  way  of  his  trade,  in  market  overt,  and  for  valuable  consideration, 
cannot  be  recovered  back  by  the  former  owner ;   from  whom  they  were 
not  stolen,  but  obtained  by  false  pretences.     Bj  thfi^common  law  goods 
are  assignable,  but  bonds  are  notj   and  all  reasoning  from  one  to  the 
other  IS  necessarily' fallacious.     The  law  touching  the  assignment  of 
bonds,  and  the  rights  of  an  assignee,  is  settled  by  a  multitude  of  cases. 
Thus  in  1  Eq.  Ca.  Ab.  44,  pi.  4,  it  is  laid  down,  that  an  assignee  of  a 
bond  must  take  it  subject  to  the  same  equity  that  it  is  in  the  hands  of 
the  obligee.     In  Davis  v.  Austin,  1  Ves.  Jr.  247,  the  Lord  Chancellor 
says :  "A  purchaser  of  a  chose  in  action  must  always  abide  by  the  case 
of  the  person  from  whom  he  buys,  that  I  take  to  be  an  universal  rule." 
In  Wheeler  v.  Huglies,  1  Dall.  23,  1  L.  Ed.  20,  the  court  says  the  as- 
signee of  a  bond  takes  it  at  his  own  peril,  and  stands  in  the  same  place 
as  the  obligee,  so  as  to  let  in  every  defalcation  which  the  obligor  had 
against  the-obligee  at  the  time  of  the  assignment  or  notice  of  it.    Rundle 
v..  Ettwein,  2  Yeates  (Pa.)  23,  is  to  the  same  effect.    So  in  Clute  v.  Robi- 
son,  2  Johns.  (N.  Y.)  595.     Clute  gave  a  bond  for  $1,200  to  Rawlins, 
and  took  back  a  separate  agreement  that  the  bond  should  be  surren- 
dered up  on  his  performing  certain  conditions.     Rawlins  assigned  the 
bond  to  Robison.    Kent,  Chancellor,  said :  "There  can  be  no  doubt  that 
Robison  took  his  assignment  subject  to  all  equities  which  attached  to  it 
in  the  hand?  of  Rawlins."    Our  statute.  Rev.  Laws,  305,  making  bonds 
assignable  and  i.  ual)ling  assignees  to  sue  in  their  own  names,  instead  of 
shaking  this  doctrine,  serves  to  confirm  it ;  it  allows  all  just  set-offs  and 
discounts  prior  to  the  assignment.     In  the  case  of  Garretsie  v.  Van 
Ness,  2  N.  J.  Law,  23,  2  Am.  Dec.  333,  this  court  decided  that  the  as- 
signment of  a  bond  transferred  no  more  interest  than  the  assignor  had 
in  it  at  the  time.     Hence  it  appears  that  every  defence  is  open  against 
James  Barrow  the  assignee,  that  the  defendant  could  have  had  against 
Benjamin  ^IcGinnis.     *     *     * 


INTKODUCTION 


II.  Indicia  of  Negotiability — Nonnegotiable  Bills  and  Notes  * 


SMITH  V.  KENDALL. 

(Court  of  King's  Bench,  1794.     6  Term  R.  123.) 

Assumpsit  for  money  paid  by  the  plaintiff  to  the  use  of  the  testator, 
money  lent  to  him,  and  on  an  account  stated  with  the  testator  and  anoth- 
er with  the  executor.  The  defendant  pleaded  the  statute  of  limitations  ; 
to  this  the  plaintiff  replied  that  the  latitat  was  sued  out  on  the  26th  of 
September  1793,  and  that  the  cause  of  action  accrued  within  6  years 
before  that  time ;  on  which  issue  was  taken. 

On  the  trial  before  Lord  Kenyon  the  plaintiff  gave  the  following  note 
in  evidence:  "Three  months  after  date  I  promise  to  pay  to  Mr.  Smith, 
Currier,  i40  value  received  in  trust  for  Mrs.  E.  Thompson,  as  witness 
my  hand.  L.  Askew,  25  June  1787."  The  defendant  objected,  1st. 
That  this  note  was  only  evidence  of  money  lent  or  paid  by  Mrs.  Thomp- 
son and  not  by  the  plaintiff  to  the  testator ;  and  2dly,  that  this  was  not 
a_promissory_note  within  the  statute,  and  if  not,  thatlhe  cause' of  action 
accrued  on  the  25th  of  September  1787,  three  months  after  the  date 
of  the  note,  and  consequently  that  6  years  had  elapsed  before  the  suing 
out  of  the  writ.  The  plaintiff  answered  that  as  the  note  was  payable  to 
him,  it  was  more  proper  to  bring  the  action  in  his  name  than  in  that  of 
Mrs.  Thompson,  and  that  the  money  when  recovered  by  him  would  be 
recovered  for  her  use;  and  in  answer  to  the  second  objection,  that  this 
was  a  promissory  note  within  the  statute,  in  which  case  three  days  were 
allowed ;  and  of  course  that  six  years  had  not  expired  when  the  latitat 
was  sued  out.  A  verdict  was  taken  for  the  defendant,  leave  being 
given  to  the  plaintiff  to  move  to  set  that  verdict  aside,  and  to  enter  a 
verdict  for  him,  if  this  court  thought  he  was  entitled  to  recover. 

A  motion  was  accordingly  made  for  that  purpose.^ 

Lord  Kenyon,  C.  ].,  said:  If  this  were  res  integra,  and  there  were 
no  decision  upon  the  subject,  there  would  be  a  great  deal  of  weight  in 
the  defendant's  objection :  but  it  was  decided  in  a  case  in  Lord  Ray- 
mond (2  Ld.  Raym.  1545)  on  demurrer,  that  a  note  payable  to  B.  with- 
out adding  or  to  his  order,  or  to  bearer,  was  a  legal  note  within  the 
act  of  Parliament.  It  is  also  said  in  Marius  that  a  note  may  be  made 
payable  either  to  A.  or  bearer,  A.  or  order,  or  to  A.  only.  In  addition 
to  these  authorities  I  have  made  enquiries  among  different  merchants 
respecting  the  practice  in  allowing  the  three  days  grace,  the  result  of 
which  is  that  the  Bank  of  England  and  the  merchants  in  London  allow 
the  three  days,  grace  on  notes  like  the  present.  The  opinion  of  mer- 
chants indeed  would  not  govern  this  court  in  a'question  of  law,  but  I 

4  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§  8,  9. 
6  Arguments  of  counsel  are  omitted. 


INDICIA  OF  NEGOTIABILITY — NONNEGOTIABLE  BILLS  AND  NOTES         5 

am  glad  to  find  that  the  practice  oLthg.  commercial  wjjxlil  coincides  with 
the  decision  of  a  court  gf  law.  therefore  I  think  that  it  would  be 
dangerous ' now  to'shake  that  practice,  which  is  warranted  by  a  solemn 
decision  of  this  court,  by  any  speculative  reasoning  upon  the  subject; 
and  consequently  this  rule  must  be  made  absolute  to  enter  a  verdict  for 
the  plaintilY. 
Rule  absolute. 


JARVIS  V.  WILSON. 
(Supreme  Court  of  Errors  of  Connecticut,  187S.     46  Conn.  90,  33  Am.  Hop.  IS.) 

Assumpsit  against  the  defendant  as  acceptor  of  an  order  drawn  on 
llim  ia.ia^:2r_of.the  plaintifiCtrought  to  the  court  of  common  pleas  of 
Hartford  county,  and  tried  to  the  court  on  the  general  issue  before 
iMcManus,  J.  Facts  found  and  judgment  rendered  for  the  plaintiff. 
jNIotion  in  error  by  the  defendant.  The  case  is  fully  stated  in  the  opin- 
ion. 

LoOMis,  J.  On  the  8th  of  July,  1874,  one  William  Murphy  owed 
the  plaintiff  $189.20,  and  drew  his  order  on  the  defendant  in  favor  of 
the  plaintiff  in  writing  as  follows : 

"Mr.  A.  M.  Wilson :  Please  pay  Joseph  Jarvis  one  hundred  and 
eighty-nine  dollars  and  twenty  cents,  and  charge  the  same  to  me. 

"William  Murphy." 

Murphy,  who  was  then  and  had  been  for  some  time  in  the  employ  of 
the  defendant,  had  been  authorized  by  the  latter  to  draw  orders  in 
favor  of  his  workmen,  of  whom  the  defendant  knew  the  plaintiff  to  be 
one. 

The  above  order  was  duly  presented  for  acceptance  to  the  defendant 
on  the  same  day  that  it  was  given,  and  the  defendant  said  it  was  good, 
and  verbally  promised  to  pay  it.  It  afterwards  appeared  that  there  was 
in  fact  due  from  the  defendant  to  the  drawer  only  $144.94,  and  there- 
upon the  defendant  refused  to  pay  the  plaintiff  as  he  had  before  agreed. 
The  court  below  upon  these  facts  held  the  defendant  liable  for  the 
full  amount  of  the  order.  We  think  the  judgment  must  stand  against 
all  the  objections  urged  in  behalf  of  the  defendant. 

The  defendant  claims,  in  limine,  that  his  undertaking  cannot  be 
regarded  as  subject  to  the  rules  applicable  to  bills  of  exchange,  but  must 
be  treated  as  a  mere  promisejo  pay  money.  But  we  do  not  see  why  it 
does  not  contain  every  essential  element  of  the  most  approved  definition 
of  a  bill  of  exchange.  It  is  a  written  order  from  Murphy,  addressed 
tQ..the  defendant,  requesting  him  to  pay  the  plaintiff  a  certain  sum  of 
money  therein  named.  1  Bouvier's  Law  Diet.,  Bill  of  Exchange  ;  Byles 
on  Bills,  57 ;  Storv  on  Bills,  §§  3.  37,  40;  Edwards  on  Bills  and  Notes, 
150;  Eastern  R.  R.  Co.  v.  Benedict,  15  Gray  (Mass.)  292;  Kendall  v. 
Galvin,  15  Me.  131,  32  Am.  Dec.  141;  Michigan  Ins.  Co.  v.  Leaven- 
worth, 30  Vt.  12. 


6  INTRODUCTION 

But  concedinsf  the  order  to  be  a  bill  of  exchancfe,  the  defendant  fur- 
ther  claifns  thai  he  is  not  liable,  because  his  ;K\\[)lance  was  only  by  pa- 
rol,  when  it  should  ha\c  l)ccii  in  writing. 

It  1^"  true,  as  a  general  rule,  that  to  make  one  liable  as  a  party  to 
a  bill  or  note  his  name  should  appear  thereon  under  his  own  hand  or 
that  of  his  agent.  A  wise  policy  may  also  require  that  the  liability 
of  an  acceptor  should  not  depend  on  parol  evidence,  and,  recognizing 
this,  some  states  have  already  changed  the  rule  of  the  common  law 
as  to  an  acceptor  of  a  bill  of  exchange.  In  New  York  it  is  required 
by  statute  that  the  acceptance  should  be  in  writing,  and  there  is  a  simi- 
lar statute  in  England  as  applicable  to  an  inland  bill.  But  where  there 
is  no  statute  to  control,  the  rule  is  quite,  general,  both  in  England  and 
nriti'5~^tfnired"STares,  that  an  acceptance  of  a'Till  of  exchange  may^  be 
by  parol.  1  Swift,  Dig.  424;  Story  on  Bills,  §§  242,  243,  246;  1  Par- 
sons"^ Cont.  267 ;  Edwards  on  Bills  and  Notes,  409 ;  Dunavan  v. 
Flynn,  118  Mass.  539;  Spaulding  v.  Andrews,  48  Pa.  411. 

The  statute  of  frauds  does  not  apply  to  such  an  undertaking.  One 
reason  may  be  that  the  acceptor  is  regarded  as  the  primary  debtor, 
and  his  acceptance  is  an  undertaking  not  merely  to  pay  a  debt  due  from 
tRF drawer  to  the  payee,  but  to  pay  his  own  debt  to  the  drawer. 

But  in  this  case  the  defendant  relies'oft  the  fact  that  when  he  ac- 
cepted the  bill  he  had  not  in  his  hands  sufficient  funds  of  the  drawer  to 
pay  the  amount  required,  and  contends  that  the  acceptance  should  there- 
fore either  be  considered  within  the  statute,  or  should  be  held  void  for 
want  of"con"sideration.  This  objection  ignores  the  fundamental  prin- 
ciple that  the  acceptance  admits  ever)'thing  essential  to  the  validity  of 
the  bill,  and  that  want  or  failure  of  consideration  cannot  be  shown  in  a 
suit  by  the  payee  against  the  acceptor.  The  presumption  is  that  every 
bill  of  exchange  is  drawn  on  account  of  some  indebtedness  from  the 
drawee  to  the  drawer,  and  that  the  acceptance  is  an  appropriation  of  the 
funds  of  the  latter  in  the  hands  of  the  former.  The  rule  of  law  is  not 
unjust  that  prevents  the  acceptor  from  showing  as  a  defence  against  a 
suit  by  the  payee  a  want  of  funds  of  the  drawer  in  his  hands,  for  it  was 
his  duty  to  ascertain  before  he  accepted  the  bill  whether  he  owed  the 
drawer  that  amount.  This  was  exclusively  within  his  knowledge,  but 
the  plaintiff  had  no  means  of  knowing  how  the  fact  was,  and  he  had  a 
right  to  assume  that  the  defendant  w^ould  not  accept  the  bill  unless  he 
had  funds  of  the  drawer  sufficient  to  make  good  the  acceptance.  Fisher 
V.  Beckwith,  19  Vt.  31,  46  Am.  Dec.  174;  Arnold  v.  Sprague,  34  Vt. 
402;  United  States  v.  Bank  of  Metropolis,  15  Pet.  377,  10  L.  Ed. 
774;  Grant  v.  Elhcott,  7  Wend.  (N.  Y.)  227;  Hoffman  v.  Bank  of  Mil- 
waukee, 12  Wall.  181,  20  L.  Ed.  366;  Parsons  on  Notes  and  Bills,  323  ; 
1  Daniel  on  Negotiable  Instruments,  135. 

There  is  no  error  in  the  judgment  complained  of. 


INDICIA  OF  NEGOTIABILITY — NONNEGOTIABLE  BILLS  AND  NOTES         7  -L  . 

PUTNAM  V.  CRYMES.  '  '  / 

(Court  of  Appeals  of  South  Carolina,  1840.     1  McMul.  9.  30  Am.  Dec.  2."0.) 

The  plaintiff  in  this  case  was  not  the^origjnal  payee,  but  held  the 
noteTiy  transfer  to  himself  bx  d^jjjufiiy-  The  note  was  made  payable  ' 
to  Alancil  Owens  or  holder,  and  the  plaintiff  declared  as  holder,  and 
defendants  demurred,  on  the  ground  that  the  holder  could  not  sue  with- 
qut  a^written  assignment.  I  regarded  holder  as  synonymous  with  bear- 
er and  overruled  the  demurrer. 

Curia,  per  ButlEr,  J.  The  word  "bearer"  is  usually  inserted  in  a 
negotiable  note,  transferable  bj  ^elivery^  "^ut  without  it,  the  maker 
o?  a  note  may  make  it  transferable  by  delivery,  either  by  circumlocu- 
tion, or  using  a  word  of  precisely  the  same  import.  As  if  a  note  were 
made  payable  to  A.  H!,  orlb  any  one  to  whom  he  may  deliver  it;  or  to 
any  one  who  might  hold  the  same  by  delivery.  In  both  cases  the  bearer 
would  be  sufficiently  meant  and  designated,  although  the  word  was  not 
used.  If  it  was  the  intention  of  the  maker  to  make  it  payable  to  any 
one  who  acquires  possession  by  delivery,  he  has  no  right  to  complain 
when  it  is  presented  to  him  without  a  written  transfer.  "Holder"  is  a 
word  of  the  same  import  as  "bearer,"  and  both  may  acquire  a  title  by 
^wfuTdeliyery,  accordingj^o  the  terms  of  the  contract.  All  the  law  re- 
quires is,  that  the  paper  must.haye  ne^^otiable  words  on  its  face,  showing 
it  to  be  the  intention  to  give  it  a  transferable  quality  by_delivery  ;  other- 
wise the  instrument  must  be  transferred  by  written  endorsemejit,  if  pay-_ 
able  to  order ;  or  sued  on  by  the  original  payee,  if  there  are  no  nego- 
tfable  words  at  all.         ——__—_► 

The  decision  below  is  affirmed :  the  whole  court  concurring. 


GILLEY  V.  HARRELL  et  al. 
(Supreme  Court  of  Tennessee,  1907.     118  Tenn.  115,  101  S.  W.  424.) 

Bill  by  A.  T.  Gilley  against  J.  R.  Harrell  and  others.  From  a  decree 
dismissing  plaintiff's  bill,  he  appeals.    Affirmed.*^ 

Sansom,  Special  Judge.  The  complainant,  A.  T.  Gilley,  appeals  to 
this  court  from  the  decree  of  the  Court  of  Chancery  Appeals  dismissing 
his  bill.  The  original  bill  in  the  case  was  filed  in  the  chancery  court  at 
Murfreesboro  to_collect  a  note  for  $300  alleged  to  have_been  executed 
by  the  defendant  J.  R.  Ilarrell  to  one  Robert  B.  Meeks,  and  by  Mocks 
transferred  and  assigned  to  the  complainant,  and  seeking  to  foreclose 
a  mortgage  or  deed  of  trust  given  to  secure  the  payment  of  the  note 
and  to  set  aside  a  previous)}  executed  trust  deed  resting  upon  tlie  prop- 
erty^   _  '         '  ' 

8  Part  of  the  opinion  is  omitted. 


8  INTKODUCTION 

The  bill  alleges  the  execution  and  transfer  of  the  note,  and  avers 
that  the  p^aintitt  i?  an  innocent  holder  thereof,  having  acquired  same 
before  maturity,  for  value,  and  in  due  course  of  trade ;  and  it  is  charged 
thaTtlie  previously  executed  trust  deed  resting  upon  the  property  was 
fraudulent  and  void. 

The  defendant  J.  R.  Harrell  filed  an  answer,  in  which  he  says  that 
he  might  have  executed  a  note  payable  to  Meeks  for  $300,  and  might 
have"  executed  a  mortgage  to  secure  the  payment  thereof,  but  that,  if 
he  did  so,  he  was  drunk  at  the  time  and  incapacitated  for  the  transac- 
tion of  business,  and  that  the  note,  if  executed,  was  without  considera- 
tion and  obtained  through  fraud,  and  at  a  time  when  he  was  unable 
to  care  for  or  protect  himself.  The  note  sued  on  is  in  these  words : 
"$300.  Murfreesboro,  Tenn.,  February  5,  1903. 

"On  the  24th  day  of  December,  1903,  I  promise  to  pay  to  Robert 
B.  JMeeks  the  sum  of  three  hundred  ($300)  dollars,  with  interest  from 
date.  This  note  secured  by  a  mortgage  on  thirty-five  acres  of  land, 
this  day  executed  by  me  and  wife  to  Robert  B.  Meeks. 

"J.  R.  Harrell." 

The  note  is  indorsed  as  follows : 

"I  this  day  transfer  and  assign  this  note  over  to  A.  T.  Gilley,  for 
value  received,  with  all  the  equities,  this  February  10,  1903. 

"R.  B.  Meeks." 

It  should  be  stated  that  the  answer  defends  upon  the  ground  that 
the  complainant,  Gilley,  is  a  dealer  in  notes  and  that  the  purchase  of 
this  note  was  void,  because  of  his  not  having  to  pay  any  license  as  such 
dealer. 

Four  errors  are  assigned  to  the  decree  of  the  Court  of  Chancery  Ap- 
peals.    *     *     * 

Taking  up  these  assignments  of  error  in  order:  The  court  held  that 
the  note  above  copied  was  nojinegotiable,  and  this  holding  is  attacked 
Under  the  common  law  the  note  was  not  negotiable,  "When  bills  of 
exchange  first  came  into  use,  as  has  already  been  explained,  choses  in 
action  in  general  were  nonassignable;  and,  in  order  that  the  irrtenrion" 
of  parlies  to  make  commercial  paper  assignable  and  negotiable  may  be 
indicated,  it  became  the  custom  to  make  it  in  express  terms  payable  to 
A^  or  order,  or  bearer,  or  using  like  words  giving  authority  to  convey. 
So,  also,  when  promissory  notes  were  by  the  statute  of  Anne  declared 
to  be  negotiable,  like  bills  of  exchange,  notes  which  would  fall  within 
the  statute  were  described  as  containing  these  [to  order  or  bearer]  or 
other  words  of  negotiability."    Tiedeman  on  Com.  Paper,  §  27. 

In  other  words,  under  the  common  law  in  order  that  a  note  should 
be  negotiable  it  had  to  be  payable  to  order,  or  to  bearer,  and  not  directly 
to  the  payee.  ,.-...-•—"       -       — 

Section  3505  of  Shannon's  Code  is  in  these  words:  "Every  note 
whereby  the  maker  promises  to  pay  money  to  any  other  person  or  order, 


INDICIA  OF  NEGOTIABILITY — NONNEGOTIABLE  BILLS  AND  NOTES         9 

or  to  the  order  of  any  other  person,  shall  be  negotiable  in  the  same  man- 
ner as  inland  bills  of  exchange  by  the  custom  of  merchants." 

Section  3506  of  Shannon's  Code  is  in  these  words :  "Every  bill,  bond 
or  note  for  money,  whether  sealed  or  not,  and  whether  expressed  to  be 
payable  to  the  order  or  for  value  received  or  not,  shall  be  negotiable 
in  the  same  manner  as  promissory  notes." 

It  is  insisted  very  earnestly  under  this  latter  Code  provision,  which  is 
section  1  of  chapter  4  of  the  Acts  of  ,1786,  that  the  note  in  controversy 
in  this  case  is  a  negotiable  instrument. 

By  Acts  1899,  p.  139,  c.  94,  entitled  "A  general  act,  relating  to  nego- 
tiable instruments,  being  an  act  to  establish  a  law  uniform  with  the 
laws  of  other  states  on  that  subject,"  it  is  provided  by  article  1,  §  1,  as 
follows:  "An  instrument  to  be  negotiable  must  conform  to  the  follow- 
ing requirements:  (1)  It  must  be  in  writing  and  signed  by  the  maker 
or  drawer.  (2)  Must  contain  an  unconditional  promise  or  order  to  pay 
a~sum  certain  in  money.  (3)  Must  be  payable  on  demand  or  at  a  fixed 
or  dettrminable  future  time.  (4j  Must  be  payable  to  order  or  to 
bearer."  " '" 

By  section  184  of  this  act  it  is  provided :  "A  negotiable  promissory 
note,  within  the  meaning  of  this  act,  is  an  unconditional  promise  in 
writing,  made  by  one  to  another,  signed  by  the  maker,  engaging  to  pay 
on  demand  or  at  a  fixed  or  determinable  future  time,  a  sum  certain  in 
money,  to  order  or  to  bearer." 

Section  8  of  the  act  is  in  these  words :  "An  instrument  is  payable 
to  order  where  it  is  drawn  payable  to  the  order  of  a  specified  person 
or  to  him  or  his  order." 

By  section  9  of  the  act  it  is  provided  as  follows :  "The  instrument 
is  payable  to  bearer  (1)  when  it  is  expressed  to  be  so  payable,  or  (2) 
when  it  is  payable  to  a  person  named  therein  or  bearer,  or  (3)  when  it 
is  payable  to  the  order  of  a  fictitious  or  nonexisting  person,  and  such 
fact  was  known  to  the  person  making  it  so  payable,  or  (4)  when  the 
name  of  the  payee  does  not  purport  to  be  the  name  of  any  person,  or 
(5)  when  the  only  or  last  indorsement  is  an  indorsement  in  blank." 

The  note  in  question  in  this  case  is  not  payable  to  either  order  or 
bearer\  UhHer'tHese provisioilsof  the  negotiable  instrument  lawj  and  in 
order  to  be  negotiable,  it  must  be  payable  in  one  or  the  other  of  these 
ways,  either  to  order  or  to  bearer.  The  earnest  insistence,  however, 
of  appellant,  is  that  section  3506  of  the  Code  (Shannon's),  above  quoted, 
is  not  repealed  by  the  negotiable  instrument  act  of  1899 ;  that  that  act 
does  not  purport  to  repeal  this  section  of  the  Code,  which  does  make  the 
note  in  question  a  negotiable  instrument.  This  insistence,  however,  is 
not  sound ;  for  by  necessary  implication,  section  3506  is  repealed  by 
this  act,  because  directly  in  conflict  therewith,  and  embracing  the  en- 
tire subject-matter  thereof.  Poe  v.  State,  85  Tenn.  495,  3  S.  W. 
658.     *     *     * 


10  BILLS  AND    NOTES  AND   THEIll  REQUISITES 


X(^ 


A' 


NEGOTIABLE  BILLS  AND  NOTES  AND  THEIR  FORMAL 
AND  ESSENTIAL  REQUISITES 

I.  Order  Contained  in  a  Bill  *■ 


RUFF  V.  WEBB. 

.     (Nisi  Prius,  before  Lord  Keuyon,  C.  J.,  1794.     1  Esp.  129.) 

Assumpsit  for  work  and  labour,  with  the  common  counts. 

Plea  of  the  general  issue. 

The  action  was  brought  to  recover  the  amount  of  wagesdue  by 
the  defendant  to  the  plaintiff.  — =— .  -^=«- 

~T!Tie  plaintiff  had  been  servant  to  the  defendant,  and,  on  his  dis- 
charging him  from  his  service,  had  given  him  a  draft  for  the  amount 
of  his  wages  on  an  unstamped  slip  of  paper,  in  the  following  words : 

"Mr.  Nelson  will  much  oblige  Mr.  Webb,  by  paying  to  J.  Ruff,  or 
order,  twenty  guineas  on  his  account." 

This  draft  the  plaintiff  had  taken,  but  it  did  not  appear  that  he  had 
ever  demanded  payment  of  it  from  Mr.  Nelson,  to  whom  it  was  ad- 
dressed. 

It  was  given  in  evidence  on  the  part  of  the  defendant,  that  he  lived 
in  the  country,  and  kept  cash  with  Mr.  Nelson  in  London,  and  that  he 
paid  all  his  bills  in  that  manner,  by  drafts  on  Nelson ;  that  the  plaintiff 
knew  that  circumstance,  and  took  the  draft  without  any  objection; 
and  that  if  he  had  applied  to  Nelson,  that  it  would  have  been  paid. 
This  evidence  was  relied  on  as  a  discharge,  and  bar  to  the  action. 

Shepherd,  for  the  plaintiff,  contended  that  the  only  mode  by  which 
this  could  operate  as  a  bar  to  the  action  was  by  taking  the  draft  in 
question  as  a  bill  of  exchange;  in  which  case,  under  St.  3  &  4  Anne, 
c.  9,  §  7,  it  is  declared  that  if  any  person  shall  accept  a  bill  of  ex- 
change, in  satisfaction  of  a  debt,  that  the  same  shall  be  deemed  a  full 
and  sufficient  discharge,  if  the  person  so  accepting  such  bill  for  his  debt 
shall  not  take  his  due  course,  by  endeavoring  to  get  the  same  accepted 
and'  paid,  and  making  his  protest  for  nonacceptance  or  nonpayment; 
but  he  contended  that  in  point  of  substance  it  was  not  a  bill  of  ex- 
change, but  a  mere  request  to  pay  money,  not  accepted  by  Nelson,  or 
such  as  could  put  the  pTaintiff'  itito  any  better  situation  with  respect  to 
his  demand.  But,  if  it  was  taken  as  a  bill  of  exchange,  that  it  could 
not  be  given  in  evidence  at  all,  as  it  was  not  stamped. 

It  was  answered  by  the  defendant's  counsel  that  the  plaintiff's  having 
accepted  the  draft  as  payment  was  a  waiver  of  every  objection  to  it,  and 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §  15. 


ORDER  COXTAIXED   IN   A   BILL  11 

that  he  was  therefore  bound  by  it,  and  could  not  recur  to  the  demand 
for  wages. 

Lord  KiCNYON  said  he  was  of  opinion  that  the  paper  offered  in  evi- 
dence  was  a  bill  of  exchange ;  that  it  was  an  order  by  one  person  to 
another  to  pay  money  to^ the  plaintiFif  ocjiis  order,  whiclLlvas.Jnj)oint 
of  form  a  bill  of  exchange;  that  as  such  it  could  not  be  given  in  evi- 
dence, wit.hout.bcing  legally  stamped ;  and,  as  the  only  mode  in  which 
it  could  operate  as  a  discharge  of  the  plaintiff's  demand  was  as  stated 
by  the  plaintiff's  counsel,  that  the  plaintiff"  in  point  of  law  was  there- 
fore entitled  to  recover. 


LITTLE  V.  SLACKFORD. 
(Nisi  Prius,  before  Lord  Tenterden,  C.  J.,  1828.     Moody  &  M.  171.) 

Debt  for  money  paid. 

The  defendant,  being  indebted  to  J.  S.  for  work  done,  gave  him  an 
unstamped  paper  addressed  to  the  plaintiff'  in  the  following  words : 

"Mr.  Little,  please  to  let  the  bearer  have  seven  pounds,  and  place 
it  to  my  account,  and  you  will  oblige 

"Your  humble  servant,  •    R.  Slackford." 

There  was  also  some  slight  evidence  that  the  defendant  had  ac- 
knowledged the  debt. 

Comyn,  for  the  defendant,  objected  that  the  paper  produced  was  a 
bjU  of  exchange,  and  could  not  be  read  for  want  of  a  stamp,  and  the 
otlier  evidence  would  not  warrant  a  verdict. 

Lord  Tenterden,  C.  J.  I  think  no  stamp  is  necessary.  The  paper 
does  not  purport  to  be  a  demand  made  by  a  party  having  a  right  to  call 
on  the  other  to  pay.  The  fair  meaning  is,  "You  will  oblige  me  by  doing 
it."  Even  without  the  paper,  the  other  evidence  would  probably  entitle 
the  plaintiff  to  a  verdict. 

Verdict  for  the  plaintiff. 


HAMILTON  v.  SPOTTISWOODE. 

(Court  of  Exchequer,  1840.     4  Excli.  200.) 

The  parties,  pursuant  to  the  order  of  Parke,  B.,  agreed  to  state, 
for  the  opinion  of  the  court,  the  following  case : 

On  the  24th  of  September,  1842,  Alexander  Wilson  and  Patrick 
Wilson,  carrying  on  the  business  of  typefounders  in  partnership,  under 
the  firm  of  Alexander  Wilson  &  Sons,  were  indebted  to  William  Gentle 
in  i6000,  for  money  lent  by  him  to  them,  no  part  of  which  has  been 
paid,  except  as  hereinafter  mentioned.  The  defendant  and  the  firm  of 
Messrs.  Eyre  &  Spottiswoode,  of  which  the  defendant  was  a  member, 
were  partners,  and  had.  for  some  time  previously  to  the  date  aforesaid, 
dealt  with  Alexander  Wilson  &  Sons,  purchasing  from  them,  from  time 


» 


12  BILLS  AND    NOTES  AND  THEIR   REQUISITES 

to  time,  large  quantities  of  type  payable  quarterly,  and  for  which  cor- 
responding quarterly  accounts  used  to  be  sent  in  by  Alexander  Wilson 
&  Sons  up  to  the  31st  ISIarch,  30th  June,  30th  September,  and  31st  De- 
cember in  each  year,  and  it  was  then  expected  that  those  dealings  would 
be  continued,  as  they  afterwards  were.  Alexander  Wilson  &  Sons  be- 
ing applied  to  for  payment,  delivered  to  William  Gentle  the  following 
order  or  authority  in  writing,  signed  by  them  and  directed  to  the  defend- 
ant: 

"To  Alexander  Spottiswoode,  Esq. 

"London,  24th  Sept.,  1842. 

"Dear  Sir — We  hereby  authorize  you,  to  pay  on  our  account,  to  the 
order  of  William  Gentle,  Esq.,  the  sum  of  six  thousand  pounds,  at  the 
following  periods,  deducting  the  amount  from  the  quarterly  accounts 
for  type  furnished  to  you  and  to  Messrs.  Eyre  &  Spottiswoode,  viz. : 

11th  November,  1843 il,000 

11th  November,  1844 l-OO^ 

11th  November,  1845 I'O^O 

11th  November,  1846 1.500 

11th  November,  1847 1.500 

"We  are,  dear  sir,  yours  very  truly, 

"Alexander  Wilson  &  Sons." 

The  said  order  or  authority  was  thereupon  taken  to  the  defendant, 
and  underneath  the  same  he  wrote  the  following  letter  or  memoran- 
dum, addressed  to  William  Gentle:  "Dear  Sir— Having  received  the 
foregoing  authority  from  Messrs.  A.  Wilson  &  Sons,  I  undertake  to 
make  you  the  payments  as  above  stated.  Middle  New-Street,  Septem- 
ber 24,  1842.  Andrew  Spottiswoode" — which  was  then,  with  the  de- 
fendant's consent,  handed  to  William  Gentle.     *     *     * 

The  question  for  the  opinion  of  the  court  is,  first,  whether  the  writ- 
ing dated  24th  September,  1842,  requires  a^billjof^£xdiange  or  promis- 
sory note  stamp. - 

nPoLLOCK,  C.  B.  We  are  all  of  opinion  that  the  letters  do  not  require 
a  bill  of  exchange  or  promissory  note  stamp  ;  they  do  not  import  an  ab- 
solute intention  that  the  money  should  at  all  events  be  paid,  but  merely 
authorize  the  defendant  to  pay  it.  As  to  the  other  point  we  will  take 
time  to  consider. 

Cur.  adv.  vult. 

The  judgment  of  the  court  was  now  delivered  by 

AldERSON,  B.  We  intimated,  at  the  time  of  the  first  argument  in 
this  case,  our  opinion  that  the  two  letters  dated  the  24th  of  September, 
1842,  the  first  from  Wilson  &  Sons  to  the  defendant,  and  the  second, 
written  on  the  same  paper,  from  the  defendant  to  the  testator  Mr. 
Gentle,  do  not  require  to  be  stamped,  either  as  a  proniissory  note  or 

2  The  statement  is  abrrdged,  and  the  arguments  and  a  portion  of  the 
opinion  of  Alderson,  B.,  are  omitted. 


PROMISE   CONTAINED    IN    A    NOTE  13 

bill  of  exchange,  but  only  constitute  and  require  _to  be  stamped  as  an 
agi'tjgtlitilrr  THat^opinion  we  still  retain.  We  do  not  think  this  is  an 
order  to  pay  any  particular  sum  of  money  at  all ;  but  we  are  of  opinion 
that  it  amounts  to  an  agrccujent,  that,  if  any  of  the  specified  portions  oT 
debt  mentioned  therein  be  at  any  time  unpaid  by  Messrs.  Wilson  &  Sons 
to  Mr.  Gentle,  and  if,  after  that  event  has  occurred  and  come  to  the 
knowledge  of  the  defendant,  any  quarterly  accounts  for  type  should 
become  due  from  the  defendant  to  Wilson  &  Sons,  the  defendant 
would,  so  far  as  those  accounts  would  extend,  pay  the  debt  due  from 
Wilson  &  Sons  to  Gentle,  of  which  he  might  so  have  notice.  Such  an 
agreement,  when  assented  to  by  all  the  parties,  would  be  irrevocable. 
Then,  if  so,  it  seems  to  follow  that  the  plaintiffs  are  entitled  to  recover 
in  the  present  suit.  *  *  * 
Judgment  for  the  plaintiffs. 


II.  Promise  Contained  in  a  Note  ■ 


HUSSEY  V.  WINSLOW. 

(Supreme  Judicial  Court  of  Maine,  Lincoln,  1870.     59  Me.  170.) 

On  exceptions. 

Assumpsit  on  a  promissory  note,  commenced  by  trustee  process,  in 
which  William  Vannah  was  summoned  as  trustee  of  the  principal  de- 
fendant. 

The  trustee  disclosed  that  on  the  4th  day  of  October,  1869,  and  be- 
fore the  service  of  the  writ  in  this  action  on  him,  he  delivered  to  the 
said  Winslow  to  whom  he  was  indebted  on  account,  a  writing,  of  which 
the  following  is  a  copy : 

"Nobleboro,  Oct.  4,  1869. 
Nathaniel  O.  Winslow,  Cr. 

By  labor  163^  days  @  $4  per  day $67  00 

Good  to  barer.  Wm.  Vannah," 

and  claimed  that  he  should  be  discharged. 

The  presiding  judge  ruled  that  the  instrument  was  a  negotiable  prom- 
issory note,  and  that  the  trustee  be  discharged.  Thereupon  the  plain- 
tiff alleged  exceptions.* 

Danforth,  J.  The  only  question  here  raised  is  whether  the  written 
instrument,  disclosed  by  the  trustee,  is  a  negotiable  promissory  note.  It 
was  evidently  so  intended  by  the  parties,  and  seems  to  possess  all  that 
is  legally  requisite  to  constitute  it  such.  It  is  not  a  mere  acknowledg- 
ment of  a  debt,  as  contended  by  the  plaintiff.  It  is  true  that  the  words, 
"Cr.  by  labor  16%  days  @  $4  per  day $67.00,"  may  very  properly 

8  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §  16. 
*  The  arguments  of  counsel  are  omitted. 


14  BILLS  AND    NOTES   AND  THEIR  REQUISITES 

be  construed  as  an  admission  that  so  much  money  is  due  l\Ir.  Winslow 
for  labor  performed  by  him.  But  the  remaining  words,  "Good  to 
barer,"  are  not  inconsistent  with  what  goes  before  and  cannot  therefore 
be  rejected.  They  must  have  some  meaning,  and,  taken  in  connection 
with*  the  words  previously  used,  that  meaning  cannot  be  doubtful.  In 
Franklin  v.  March,  6  N.  H.  364,  25  Am.  Dec.  462,  in  a  similar  instru- 
ment the  word  "good"  was  held  to  imply  a  promise.  In  the  paper  under 
consideration,  no  other  meaning  can  be  attached  to  it  than  a  promise  to 
pay  for  the  labor  received.  Nor  is  the  promise  to  pay  in  labor.  Labor 
is  not  mentioned  except  as  the  consideration  for  the  promise.  The  sum 
due  has  prefixed  to  it  the  mark  for  dollars,  and  there  is  no  intimation 
that  it  is  to  be  paid  in  any  other  way  than  by  money.  In  such  cases  the 
debt  can  only  be  discharged  by  lawful  currency.  The  sum  to  be  paid  is 
definite  and  subject  to  no  contingency.  It  is  to  be  paid  absolutely,  and 
as  no  time  is  given  it  is  payable  on  demand.  Nor  can  there  be  any  doubt 
as  to  the  payee,  if  any  were  necessary  in  a  note  payable  to  bearer.  Na- 
thaniel O.  Winslow  is  named  as  the  person  from  whom  the  considera- 
tion proceeds,  and  if  there  were  no  other  indication  as  to  whom  the 
promise  is  made  the  law  would  deem  this  sufficient.     Story  on  Notes, 

§  36. 

It  would  seem  that  the  only  possible  construction  which  can  be  given 
to  this  instrument  is,  substantially,  this:  In  consideration  of  16% 
days'  labor,  performed  by  Nathaniel  O.  Winslow,  at  4  per  day,  amount- 
ing to  $67,  I  promise  to  pay  him  or  bearer,  that  sum  on  demand. 
[Signed]   William  Vannah. 

Here  we  have  every  element  of  a  negotiable  promissory  note;  a 
maker,  a  payee,  a  promise  or  engagement  to  pay  a  certain  sum  of  money 
at  a  specified  time,  absolutely  and  unconditionally,  and  the  word  "bear- 
er" to  make  it  negotiable. 

Exceptions  overruled. 


GAY  V.  ROOKE. 

(Supreme  Judicial  Court  of  Massachusetts,  Middlesex,  1890.     151  Mass.  115, 
23  N.  B.  835,  7  L.  R.  A.  392,  21  Am.  St.  Rep.  434.) 

Contract  on  the  following  instrument,  declared  on  as  a  promis- 
sory note : 

"Marlboro',  Sept.  23,  1881. 

"I.  O.  U.,  E.  A.  Gay,  the  sum  of  seventeen  dolls.  Vioo,  for  value 
received.  John  R.  Rooke." 

Writ  dated  September  19,  1887.  At  the  trial  in  the  superior 
court,  without  a  jury,  before  Dewey,  J.,  the  only  issue  was  wheth- 
er the  plaintiff  was  entitled  to  interest  from  the  date  of  the  instru- 
ment, or  from  that  of  the  writ,  the  service  of  which  was  the  only 
demand  made  by  the  plaintiff. 


PROMISE    CONTAINED    IN    A    NOTE  1', 

The  plaintiff  asked  the  judge  to  rule,  as  matter  of  law,  that  he 
was  entitled  to  interest  from  the  date  of  the  instrument.  The 
judge  declined  so  to  rule,  and  ruled  that  interest  could  be  recovered 
from  the  date  of  the  writ  only,  and  found  for  the  plaintiff  for  $17.- 
05  only;  and  the  plaintiff  alleged  exceptions. 

Dkvens,  J.  In  order  to  constitute  a  good  promissory  note,  there 
should  be  an  express  promise  on  the  face  of  the  instrument  to  pay 
the  money.  A  mere  promise  implied  by  law,  founded  on  an  ac- 
knowledged indelStedness,  will  not  b_e_  sufhcient.  Story,  Prom. 
Notes,  §  14;  Brown  v.  Gilman,  13  Mass.  158.  While  such  promise 
need  not  be  expressed  in  any  particular  form  of  words,  the  lan- 
guage used  must  be  such  that  the  written  undertaking  to  pay  may 
fairly  be  deduced  therefrom.  Commonwealth  Ins.  Co.  v.  Whitney, 
1  Mete.  21.  In  this  view,  the  instrument  sued  on  cannot  be  con- 
sidered a  promissory  note.  It  is  an  acknowledgment  of  a  debt 
only;  and,  although  from  such  an  acknowledgment  a  promise  to 
pay  may  be  legally  implied,  it  is  an  implication  from  the  existence 
of  the  debt,  and  not  from  any  promissory  language.  Something 
more  than  this  is  necessary  to  establish  a  written  promise  to  pay 
money.  It  was  therefore  held  in  Gray  v.  Bowden,  23  Pick.  282. 
that  a  memorandum  on  the  back  of  a  promissory  note,  in  these 
words,  "I  acknowledge  the  within  note  to  be  just  and  due,"  sign--  / 
ed  by  the  maker,  and  attested  by  a  witness,  was  not  a  promissory  ^^'^'^^.c 
note  signed  in  the  presence  of  an  attesting  witness  within  the 
meaning  of  the  statute  of  limitations.  In  England  an  I.  O.  U.,(]  -\^ 
there  being  no  promise  to  pay  embraced  therein,  is  treated  as  a  due- 
bill  only.  The  cas^s,_wliich  arose  principally  under  the  stamp  act, 
are  very  numerous,  and  they  have  held  that  such  a  paper  did  not 
require  a  stamp,  as  it  was  only  evidence  of  a  debt.  1  Daniel,  Neg. 
Inst.  (3d  Ed.)  §  36;  1  Rand.  Com.  Paper,  §  88;  Fesenmaver  v. 
Adcock,  16  Mees.  &  W.  449;  Melanotte  v.  Teasdale,  13  Alees.  & 
W.  216;  Smith  v.  Smith,  1  Post.  &  F.  539;  Gould  v.  Coombs,  1  C. 
B.  543;  Fisher  v.  Leslie,  1  Esp.  425;  Israel  v.  larael,  1  Camp.  499; 
Childers  v.  Boulnois,  Dowl.  &  R.  N.  P.  8;  and  Beeching  v.  West- 
brook,  8  Mees.  &  VV.  412. 

While,  in  a  few  states,  it  has  been  held  otherwise,  the  law  as 
generally  understood  in  this  country  is  that,  in  the  absence  of  any 
statute,  a  mere  acknowledgment  of  a  debt  is  not  a  promissory  note; 
and  such  is,  we  think,  the  law  of  this  commonwealth.  Gray  v.  Bow- 
den, 23  Pick.  282;  Commonwealth  Insurance  Co.  v.  Whitney,  1  Mete. 
21;  Daggett  v.  Daggett,  124  Mass.  149;  Almy  v.  Winslow,  126 
Mass.  342;  Carson  v.  Lucas,  13  B.  Mon.  (Ky.^)  213;  Garland  v. 
Scott,  15  La.  Ann.  143;  Currier  v.  Lockwood,  40  Conn.  349.  16  Am. 
Rep.  40;  Brenzer  v.  Wightman,  7  Watts  &  S.  (Pa.)  264;  Biskup 
v.  Oberle,  6  Mo.  App.  583.  Some  states  have  by  statute  extended 
the  law  of  bills  and  promissory  notes  to  all  instruments  in  writing 


16  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

and  whereby  any  person  acknowledges  any  sum  of  money  to  be 
due  to  any  other  person.  1  Randolph,  Com.  Paper,  §  88 ;  Rev.  St. 
111.  1884,  c.  98,  §  3 ;  Gen.  St.  Colo.  1883,  c.  9,  §  3 ;  Rev.  St.  Ind. 
1881,  §  5501;  Rev.  Code  Iowa,  1873,  §  2085;  Rev.  Code  Miss. 
1880,  §§  1123,  1124. 

We  have  no  occasion  to  comment  upon  those  instruments  in 
which  words  have  been  used  or  superadded  from  which  an  inten- 
tion to  accompany  the  acknowledgment  with  a  promise  to  pay  has 
been  gathered,  or  where  the  form  of  the  instrument  fairly  led  to 
that  conclusion.  Daggett  v.  Daggett,  124  Mass.  149;  Almy  v. 
Winslow,  126  Mass.  342.  No  such  words  exist  in  the  instrument 
sued,  nor  is  it  in  form  anything  but  an  acknowledgment.  The  words 
"for  value  received"  recite  indeed  the  consideration,  but, they  add 
nothing  which  can  be  interpreted  as  a  promise  to  pay.  It  is  there- 
fore unnecessary  to  consider  whether,  if  the  paper  were  a  prom- 
issory note,  interest  should  be  calculated  from  its  date.  Upon 
this  point  we  express  no  opinion.  If  it  is  to  be  treated  as  an  ac- 
knowledgment of  debt  only,  as  we  think  it  must  be,  the  plaintifi'  is 
not  entitled  to'interest  except  from  the  date  of  the  writ.  Even 
if  it  was  the  duty  of  the  defendant  to  have  paid  the  debt  on  de- 
mand, yet  if  no  demand  was  made,  if  no  time  was  stipulated  for  its 
payment,  if  there  was  no  contract  or  usage  requiring  the  payment 
of  interest,  and  if  the  defendant  was  not  a  wrongdoer  in  acquiring 
or  detaining  the  money,  interest  should  be  computed  only  from 
the  demand  made  by  the  service  of  the  writ.  Dodge  v.  Perkins, 
9  Pick.  368;  Hunt  v.  Nevers,  15  Pick.  500,  26  Am.  Dec.  616.  "In 
general,"  says  Chief  Justice  Shaw,  "when  there  is  a  loan  without 
any  stipulation  to  pay  interest,  and  where  one  has  the  money  of 
another,  having  been  guilty  of  no  wrong  in  obtaining  it,  and  no  de- 
fault in  retaining  it,  interest  is  not  chargeable."  Hubbard  v. 
Charlestown  Railroad  Co.,  11  Mete.  124;  Calton  v.  Bragg,  15 
East,  223 ;  Shaw  v.  Picton,  4  Barn.  &  C.  723 ;  Moses  v.  Macferlan, 
2  Burr.  1005 ;   Walker  v.  Constable,  1  Bos.  &  P.  306. 

Exceptions  overruled. 


HUYCK  V.  MEADOR. 
(Supreme  Court  of  Arkansas,  18G6.     24  Ark.  191.) 

ClEndEnin,  Special  Judge. "^  The  appellant  in  this  court,  who  was 
the  plaintiff  in  the  court  below,  commenced  his  action  of  assumpsit  in 
the  circuit  court  of  Pulaski  county.  The  declaration  contained  two 
counts ;   the  first  count  based  on  the  following  instrument  in  writing : 

"Due  I.  Huyck,  or  order,  the  sum  of  three  thousand  nine  hundred 

6  Part  of  the  opinion  is  omitted. 


PROMISE    CONTAINED    IX    A    NOTE  17 

and  twenty  eight  dollars  ($3,928),  for  value  received  of  him,  and  on 
settlement  up  to  date.  C.  V.  Meador. 

"Little  Rock,  Ark.,  Feb.  16,  1865." 

***♦***♦* 

We  come  now  to  consider  the  other  objection,  raised  by  the  record 
and  the  assignment  of  error.  This  question  grows  out  of  the  action 
of  the  court  below  in  refusing  to  permit  the  plaintiff  to  read  as  evi- 
dence, on  the  trial,  the  writing  (a  copy  of  which  is  given  before  in  this 
opinion),  and  which  writing  may  be  said  to  be  the  foundation  of  the 
suit.  The  first  count  of  the  declaration  avers  that  the  defendant  "made 
his  certain  promissory  note  in  writing,"  etc.,  and  that  "he  promised  to 
pay  immediately,"  etc.  The  first  question  to  be  decided  is,  was  the  in- 
strument offered  in  evidence  a  promissory  note?  and,  secondly,  if  it 
was,  when  was  it  payable? 

A  promissory  note  is  a  written  promise  for  the  payment  of  money. 
Bayley  on  Bills,  1,  3.  The  case  of  Russell  v.  Whipple,  2  Cow.  (N.  Y.) 
536,  was  upon  a  duebill  in  the  following  words:  "Due  Lawson  Russell, 
or  bearer,  two  hundred  dollars  and  twenty-six  cents  for  value  received." 
The  court  held  in  this  case  that  this  instrument  was  a  promissory  note. 

In  the  case  of  Kimball  v.  Huntington,  10  Wend.  (N.  Y.)  679,  680, 
25  Am.  Dec.  590,  the  court  decided  that  an  instrument  similar  to  the 
one  oft'ered  in  evidence  in  this  case  is  a  promissory  note.  As  it  contains 
every  quality  essential  to  such  paper,  the  acknowledgment  of  indebted- 
ness on  its  face  implies  a  promise  to  pay.  So  in  the  case  of  Franklin 
v.  March,  6  N.  H.  364,  25  Am.  Dec.  462,  it  was  held  that  a  writing  in 
these  words,  "Good  to  Cochran  or  order,  for  thirty  dollars,  borrowed 
money,"  is  a  promissory  note.  See,  also.  Smith's  Mercantile  Law,  263  ; 
Luqueer  v.  Prosser,  1  Hill  (N.  Y.)  259;  Hitchcock  v.  Cloutier,  7  Vt. 
22;   United  States  v.  White,  2  Hill  (N.  Y.)  59,  37  Am.  Dec.  374. 

Holding,  as  we  do  that  the  instrument  declared  on  in  this  case  and 
offered  in  evidence  is  a  promissory  note,  the  inquiry  next  arises  when, 
by  its  terms,  did  it  become  due  and  payable.  No  time  of  payment  being 
named  in  the  note,  it  is  due  immediately,  and  w^as  so  correctly  described 
in  the  plaintiff's  declaration.  See  Sackett  v.  Spencer,  29  Barb.  (N.  Y.) 
180;  Thompson  v.  Ketchum,  8  Johns.  (N.  Y.)  191,  192,  5  Am.  Dec. 
332;  Gaylord  v.  Van  Loan,  15  Wend.  (N.  Y.)  308;  Cornell  v.  Moulton, 
3  Denio  (N.  Y.)  12. 

We  are  therefore  of  the  opinion  that  there  was  no  variance  between 
the  note  oft'ered  in  evidence  and  that  declared  on,  and  that  the  circuit 
court  erred  in  not  permitting  the  note  to  be  read  in  evidence.     ♦     *     ♦ 

Reversed. 

Moore  Cases  B.&  N.— 2 


18  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

STAGG  V.  PEPOON. 

(Constitutional  Court  of  South  Carolina,  ISIS.     1  Nott   &  McC.  102.) 

This  case  was  tried  before  Mr.  Justice  Smith,  at  Charleston. 

It  was  an  action  of  assumpsit  on  a  duebill,  made  by  the  defendant 
to  the  plaintiffs.  When  produced  in  evidence,  it  was  in  the  following 
words  :  "Due  Messrs.  Jacob  D.  Stagg  &  Co.,  or  order,  one  hundred  and 
thirty-five  dollars,  payable  on  demand.     [Signed]      Benj.  Pepoon." 

It  appeared  in  evidence,  that  the  words  "or  order"  were  not  inserted 
in  the  bill  originally,  and  that  the  plaintiff  had  requested  the  defendant 
to  permit  him  to  insert  them,  with  a  view  to  negotiate  it;  but  he  ex- 
pressly refused  his  assent.  The  plaintiff,  notwithstanding,  did  insert 
them. 

Several  grounds  of  defense  were  stated  in  the  brief  to  have  been 
taken  on  the  trial,  in  the  circuit  court,  and  among  others  that  the  inser- 
tion of  the  words  "or  order"  was  such  an  alteration  as  destroyed  the 
validity  of  the  note. 

The  jury  however,  under  the  direction  of  the  presiding  judge,  found 
a  verdict  for  the  plaintiff,  and  a  motion  was  now  made  for  a  new  trial, 
on  the  part  of  the  defendant,  on  the  ground : 

That  the  insertion  of  the  words  "or  order,"  in  the  bill,  without  the 
consent  of  the  defendant,  is  such  an  alteration,  in  a  material  part,  as 
wholly  destroyed  the  validity  of  the  bill,  and  that  the  plaintiff  was  not 
therefore  entitled  to  recover. 

Mr.  Justice  Johnson,  delivered  the  opinion  of  the  court. 

It  has  not  been  denied  in  the  argument,  and  numerous  authorities 
prove,  that  an  alteration  in  a  bill  of  exchange,  or  promissory  note,  in  a 
material  part,  without  the  consent  of  the  drawer,  will  discharge  him 
from  all  liability  on  it.  Chitty  on  Bills,  85.  The  duebill,  in  this  case,  as 
it  originally  stood,  without  the  words  "or  order,"  was  not  negotiable, 
either  by  the  custom  of  merchants  or  the  statute  of  Anne.  And  that 
the  negotiability  of  a  paper,  in  mercantile  transactions,  is  material  and 
important,  will  not  be  questioned.  But  it  has  been  suggested  that  even 
with  the  words  "or  order"  the  bill  was  not  negotiable,  not  being  a  prom- 
issory note  within  the  statute  of  Anne,  and  that,  therefore,  the  altera- 
tion was  immaterial,  as  it  did  not  change  the  nature  and  character  of 
the  writing. 

No  precise  form  of  words  is  necessary  to  constitute  a  promissory 
note ;  it  is  sufficient  if  it  amount  to  a  promise  or  undertaking  to  pay 
unconditionally.  A  "promise  to  account  with  J,  S.  or  order,"  and  "I 
acknowledge  myself  indebted  to  A.  &  Co.  to  be  paid  on  demand,"  have 
been  held  to  be  promissory  notes  within  the  meaning  of  the  statute  of 
Anne,  1  Selwyn's  N.  P.  395.  It  appears  to  me  impossible  to  distin- 
guish the  present  case  from  the  last.    The  word  "due"  is  clearly  an  ac- 


PROMISE    CONTAINE'D    IN    A    NOTE  19 

knowlcdgmcnt  of  a  subsisting  debt,  and  the  words  "payable  on  demand" 
necessarily  imply  a  promise  to  pay. 

I  am  therefore  of  opinion  that  the  motion  for  a  new  trial  ought  to 
prevail. 


YOUNG  V.  AMERICAN  BANK.    (No.  1.) 

(Supreme  Court,  Special  Term,  New  York  County,  1904.     44  MLsc.  Rep.  305, 

89  N.  Y.  Supp.  913.) 

Action  by  John  Young  against  the  American  Bank.  Warrant  of  at- 
tachment vacated. 

GiEGERiCH,  J.  A  number  of  questions  are  discussed  in  the  briefs, 
but  only  a  single  one  need  be  considered,  and  that  is  whether  a  cause 
of  action  is  set  forth  in  the  papers  on  which  the  attachment  was  pro- 
cured. The  allegations  concerning  the  plaintiff's  claim,  as  set  forth 
in  the  affidavit,  are  as  follows:  That  on  or  about  the  1st  day  of  Feb- 
ruary, 1902,  the  defendant,  for  value,  made  and  delivered  to  the  In- 
ternational Money  Box  Company  its  certificate  of  deposit  (so-called)  in 
the  following  form : 

"Mexico.  $5,000. 

"Certificate  of  Deposit  in  Favor  of  the  International  Money  Box 

Company. 

"Mexico,  February  1,  1902. 

"We  hereby  certify  that  we  have  on  this  date  placed  to  the  credit 
of  the  International  Money  Box  Company  of  New  York  and  Chicago 
the  amount  of  $5,000  (five  thousand  dollars)  United  States  currency. 
This  amount  is  left  on  deposit  in  this  bank  with  the  understanding  that 
it  is  not  to  be  withdrawn  for  two  years,  counted  from  this  date,  in 
consideration  of  which  we  hereby  agree  to  pay  the  International  Money 
Box  Company  straight  interest  at  the  rate  of  7%  (seven  per  cent.)  per  , 
annum.  The  American  Bank,  F.  J.  Dunkerly,  Cashier. 

"The  American  Bank,  Ricardo  Colin,  Ass't  Manager." 

It  is  further  alleged  that  prior  to  the  maturity  of  said  certificate 
the  same  was,  for  value,  indorsed  by  the  International  Money  Box 
Company,  and  thereafter  was,  for  value,  transferred  and  delivered 
to  the  plaintiff,  who  is  now  the  holder  and  owner  thereof.  Fur- 
thermore, that  at  maturity  the  certificate  was  presented  for  pay- 
ment, and  payment  demanded  and  refused,  and  that  the  certificate 
remains  in  the  hands  of  the  plaintiff  wholly  unpaid.  It  is  evident 
at  a  glance  that  the  theory  upon  which  the  attachment  was  procur- 
ed is  that  the  so-called  certificate  is  an  instrument  for  the  payment 
of  money,  which  could  be  assigned  by  indorsement  and  delivery. 
On  the  other  hand,  on  behalf  of  the  defendant  it  is  insisted  that 
the^paper"  is~not  a  negotiable  instrument  with  the  well-recognized 
characteristics  of  such  instruments,  but  is  a  mere  receipt  contain- 


20  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

ing  no  promise  to  pay  whatever,  quoting  upon  this  point,  among- 
other  authorities,  Daniel  on  Negotiable  Instruments,  as  follows : 
"A  simple  certificate  of  deposit  containing  no  words  of  promise  to 
pay  the  amount  is  nothing  more  than  a  receipt,  and  could  not  be 
the  basis  of  an  action  against  the  bank,  nor  would  it  be  a  transfer- 
able security ;  *  *  *  the  word  'certify'  adding  no  additional 
force  to  the  instrument  as  purporting  a  contract"  2  Daniel,  Neg. 
Insts.  (5th  Ed.)  §  1704. 

In  Hotchkiss  v.  Mosher,  48  N.  Y.  478,  in  speaking  of  a  paper 
quite  similar  in  its  character  to  the  one  in  hand,  the  court  said 
(page  482)  :  "The  certificate  was  simply  an  acknowledgment  of  so 
much  money  deposited  with  the  bank.  It  was  of  the  same  force 
and  effect  as  a  receipt  for  money.  The  word  'certify'  adds  no  addi- 
tional force  to  the  instrument,  as  purporting  a  contract.  It  con- 
tained no  promise  on  the  part  of  the  defendants;  and,  if  it  had,  the 
portion  which  operated  as  a  receipt  for  money  was  quite  as  capa- 
ble of  separation  from  that  part  which  evidenced  a  contract  as  in 
the  case  of  a  bill  of  lading.  A  certificate  or  acknowledgment  that 
another  has  deposited  a  sum  of  money  has  the  effect  of  an  ac- 
knowledgment by  one  party  that  he  has  received  a  sum  of  money 
from  another.  A  simple  certificate  like  the  one  in  question  is  not 
the  basis  of  an  action,  like  a  promise  in  writing,  but  would  be  evi- 
dence, like  a  receipt,  to  raise  an  implied  promise  to  pay  in  an  ac- 
tion for  money  had  and  received.  We  are  of  the  opinion  that  parol 
evidence  was  admissible  to  explain  the  certificate  in  the  same 
manner  as  in  the  case  of  a  receipt." 

So,  too,  in  the  more  recent  case  of  First  Nat.  Bank  v.  Clark,  134 
N.  Y.  368,  32  N.  E.  38,  17  L.  R.  A.  580,  the  same  court,  speaking 
of  a  paper  in  the  following  form:  "Deposited  by  Sliney  &  Whe- 
lan  with  Judson  H.  Clark,  Banker,  Scio,  N.  Y,,  December  5,  1882. 
Discount,  $3,412.50.  F.  M.  Babcock"— said  (page  372,  134  N.  Y., 
page,  39,  32  N.  E.,  17  L.  R.  A.  580) :  "The  appellant  calls  it  [the 
paper]  a  'certificate  of  deposit,'  but  such  designation  is  not  accu- 
rate. It  is  in  fact  what  the  witnesses  for  both  plaintiff  and  defend- 
ant assert  it  to  be,  a  deposit  slip  or  deposit  check.  The  use  of  the 
deposit  slip  is  well  understood.  It  constitutes  an  acknowledgment 
that  the  amount  of  money  named  therein  has  been  received.  It  is 
a  receipt,  and  nothing,  more.  No  promise  is  made  to  pay  the  sum 
named  on  return  of  the  paper.  Nor  is  it  expected,  either  by  the 
depositor  or  depositary,  that  it  will  ever  be  presented  to  the  bank 
again  unless  a  dispute  should  arise  as  to  the  amount  of  deposit,  in 
which  event  it  would  become  important  as  evidence.  It  is  not  in- 
tended to  furnish  evidence  that  there  remains  money  in  the  bank 
to  the  credit  of  a  depositor,  but  to  furnish  evidence  as  between  de- 
positor and  depositary  that  on  a  given  date  there  was  deposited 
the  sum  named.     It  may  all,  or  nearly  all,  be  checked  out  at  the 


PROMISE   CONTAINED  IN  A   NOTE  21 

moment  of  making  the  deposit  slip;  but  the  depositor  will  not  be 
refused  it  on  that  account,  for  long-established  usage  has  fixed  its 
status  in  banking  as  a  mere  receipt,  an  acknowledgment  that  the 
depositor  placed  the  amount  named  therein  on  deposit.  It  is  not 
proof  of  liability,  and  it  will  not  support  an  action  against  the 
bank.  Hotchkiss  v.  Mosher,  48  N.  Y.  482 ;  2  Daniel,  Neg.  Insts.  § 
1704.  Should  a  suit  be  brought  on  the  debt,  however,  it  would  fur- 
nish evidence  as  to  time  of  deposit  and  amount,  but  it  has  no  oth- 
er use,  unless  it  be  to  assist  in  the  settlement  of  a  dispute  out  of 
court.  The  delivery  of  the  deposit  slip,  therefore,  did  not  operate 
to  assign  the  debt.  There  was  no  writing  made  or  delivered  to  the 
plaintiff  other  than  the  check  and  deposit  slip,  both  of  which  we 
have  already  considered." 

Calling  the  paper  before  us  a  certificate  of  deposit..does  not  alter 
its  true  character,  or  import  into  it  the  express  promise  to  pay 
which  is  a  characteristic  of  negotiable  instruments,  and  which  is  a 
part  of  certificates  of  deposit  properly  so  called.  In  volume  5  of 
the  American  and  English  Encyclopaedia  of  Law  (2d  Ed.)  at  page 
801,  a  certificate  of  deposit  is  defined  as  "a  written  acknowledg- 
ment by  a  bank  or  banker  of  the  receipt  of  a  sum  of  money  on  de- 
posit, which  the  bank  or  banker  promises  to  pay  to  the  depositor, 
to  bearer,  to  the  order  of  the  depositor,  or  to  some  other  person  or 
to  his  order."  I  am  clearly  of  the  opinion,  therefore,  that  the  papers 
on  which  the  attachment  was  procured  are  fatally  defective  in  fail- 
ing to  show  any  valid  assignment  of  the  claim  in  question.  Such 
an  assignment  cannot  be  m^de  merely  by  indorsing  the  paper,  but 
would  have  to  be  made  in  the  same  manner  as  any  other  chose  in 
action  is  assigned. 

]\luUun  i^ranted,  with  $10  costs. 


YOUNG  V.  AMERICAN  BANK.     (No.  2.) 

(Supreme  Court,  Special  Term.  New  York  County,  1904.     44  Misc.  Rep.  308, 

89  N.  Y.  Supp.  915.) 

Action  by  Young  against  the  American  Bank.  Motion  to  vacate 
warrant  of  attachment  granted. 

GiEGERiCii,  J."  The  five  instruments  upon  which  this  action  is 
proposed  to  be  brought  are  distinctly  different  in  their  terms  from 
the  one  involved  in  action  No.  1,  herewith  decided  (44  Misc.  Rep. 
305,  89  N.  Y.  Supp.  913),  the  dates  varying,  and  read  as  follows: 

"Mexico.  This  is  to  certify  that  the  International  Money  Box 
Co.  of  New  York  has  a  deposit  of  the  amount  of  three  hundred 

8  Part  of  the  opinion  is  omitted. 


22  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

dollars  ($300)  U,  S.  currency  in  this  hank,  which  deposit  bears  in- 
terest at  the  rate  of  seven  per  cent.  (79^)  per  annum,  payable  an- 
nually. This  certificate  is  due  two  years  from  this  date,  or  on  the 
seventh  of  April,  nineteen  hundred  and  four,  and  will  be  cashed 
only  upon  being-  returned  to  the  bank  by  the  International  Money 
Box  Co.  of  New  York  or  their  order.  City  of  Mexico,  April  7, 
1902.  The  American  Bank,  F.  J.  Dunkerly,  Cashier.  The  Ameri- 
can Bank,  Ricardo  Colin,  Ass't  Manager." 

While  there  is  no  promise  to  pay  in  so  many  words,  still  I  think 
the  language  of  the  last  paragraph  of  the  instrument  is  susceptible 
of  no  other  construction  than  such  a  promise  to  pay  at  the  expi- 
ration of  two  years  either  to  the  International  Money  Box  Com- 
pany or,  their  order.  It  is  noticeable  in  this  case,  as  distinguished 
from  the  other,  that  the  paper  upon  its  face  is  treated  as  possess- 
ing negotiable  attributes  in  that  it  provides  for  payment  either  to 
the  original  holders  or  to  their  order,  and,  furthermore,  provides 
for  the  return  of  the  certificate  before  payment  will  be  made.  This 
difterentiates  it  in  a  marked  degree  from  writings  like  that  referred 
to  in  the  memorandum  herewith  handed  down  in  action  No.  1, 
w^hich  contains  no  promise  to  pay,  and  no  provision  for  transfer- 
ence by  order,  nor  any  requirement  that  it  be  produced  when  pay- 
ment is  demanded.  Because  of  these  facts  the  reasons  set  forth 
in  the  authorities  quoted  from  in  that  memorandum  do  not  apply, 
and  it  must  be  held  that  the  indorsement  and  delivery  in  this  case 
constituted  a  sufficient  assignment. 

The  attachment  is  challenged,  however,  on  other  grounds. 
*     *     *     Motion  granted  on  other  grounds. 


III.  Certainty  as  to  the  Terms  of  the  Order  or  Promise  ^ 


KELLEY  V.  HEMMINGWAY. 

(Supreme  Court  of  Illinois,  1852.     13  111.  604,  56  Am.  Dec.  474.) 

This  cause  was  tried  by  Henderson,  Judge,  without  the  inter- 
vention of  a  jury,  at  the  special  term  in  June,  1851,  of  the  Du 
Page  circuit  court,  and  resulted  in  a  judgment  for  Hemmingway, 
the  assignee  of  the  note,  for  the  sum  of  $75.73  damages  and  costs. 
Thereupon  Kelley  appealed  to  this  court. 

The  facts  of  the  case  are  stated  in  the  opinion. 

Treat,  C.  J.  This  was  an  action  brought  by  Hemmingway 
against  Kelley  before  a  justice  of  the  peace,  and  taken  by  appeal 

7  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
lT-20. 


CERTAINXr   AS   TO   THE    TERMS   OF   THE   ORDER   OR   PROMISE  23 

to  the  circuit  court.     On  the  trial  in  the  latter  court,  the  plaintiff 
offered  in  evidence  an  instrument  in  these  words: 

"Castleton,  April  27,  1844. 

"Due  Henry  D.  Kclley  $53,  when  he  is  twenty-one  years  old. 
with  interest.  David  Kelley." 

On  the  back  of  which  was  this  indorsement : 

"Rockton,  May  21,  1849. 

"Signed  the  within,  payable  to  Moses  Hemmingway. 

"Henry  Kelley." 

The  plaintiff  proved  that  the  payee  became  of  age  in  August, 
1849.  The  defendant  objected  to  the  introduction  of  the  instrument 
because  it  was  not  negotiable,  but  the  court  admitted  it  in  evi- 
dence and  rendered  judgment  for  the  plaintiff. 

Our  statute  makes  promissory  notes  assignable  by  indorsement 
in  writing,  so  as  absolutely  to  vest  the  legal  interest  in  the  as- 
signee. Was  the  instrument  in  question  a  promissory  note?  To 
constitute  a  promissory  note,  the  money  must  be  certainly  paya- 
ble, not  dependent  on  any  contingency,  either  as  to  event  or  the 
fund  out  of  which  payment  is  to  be  made,  or  the  parties  by  or  to 
whom  payment  is  to  be  made.  If  the  terms  of  an  instrument 
leave  it  uncertain  whether  the  money  will  ever  become  payable,  it 
cannot  be  considered  as  a  promissory  note.  Chitty  on  Bills,  134. 
Thus,  a  promise  in  w-riting  to  pay  a  sum  of  money  when  a  par- 
ticular person  shall  be  married  is  not  a  promissory  note,  because 
it  is  not  certain  that  he  will  ever  be  married.  Pearson  v.  Ganet,  4 
Mod.  242,;  Beardsley  v.  Baldwin,  2  Strange,  1151.  So  of  a  promise 
to  pay  when  a  particular  ship  shall  return  from  sea,  for  it  is  not 
certain  that  she  will  ever  return.  Palmer  v.  Pratt,  2  Bing.  185 ; 
Coolidge  V.  Ruggles,  15  Mass.  387.  In  all  such  cases,  the  promise 
is  to  pay  on  a  contingency  that  may  never  happen.  But  if  the 
event  on  which  the  money  is  to  become  payable  must  inevitably 
take  place,  it  is  a  matter  of  no  importance  how  long  the  payment 
may  be  suspended.  A  promise  to  pay  a  sum  of  money  on  the 
death  of  a  particular  individual  is  a  good  promissory  note,  for  the 
event  on  which  the  payment  is  made  to  depend  will  certainly  tran- 
spire.   Colehan  v.  Cooke,  Willes,  393;  s.  c,  2  Strange,  1217. 

In  this  case,  the  payment  w^as  to  be  made  when  the  payee  should 
attain  -liis  majority — an  event  that  might  or  might  not  take  place. 
The  contingency  might  never  happen,  and  therefore  the  money 
was  not  certainly  and  at  all  events  payable.  The  instrumeritlack- 
ed  one  of  the  essential  ingredients  of  a  promissory  note,  and  con- 
sequently was  not  negotiable  under  the  statute.  The  fact  that  the 
payee  lived  till  he  was  twenty-one  years  of  age  makes  no  differ- 
ence. It  was  not  a  promissory  note  when  made,  and  it  could  not 
become  such  by  matter  ex  post  facto.  The  plaintiff'  has  not  the 
legal  title  to  the  instrument.  If  it  presents  a  cause  of  action 
against  the  maker,  the  suit  must  be  brought  in  the  name  of  the 


24  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

payee.  The  case  of  Goss  v.  Nelson,  1  Burr.  226,  is  clearly  distin- 
guishable from  the  present.  There  the  note  was  made  payable  to 
an  infant  when  he  should  arrive  at  age,  and  the  day  when  that 
was  to  be  was  specified.  The  court  held  the  instrument  to  be  a  good 
promissory  note,  but  expressly  on  the  ground  that  the  money  was 
at  all  events  payable  on  the  day  named,  whether  the  payee  should 
live  till  that  time  or  die  in  the  interim ;  and  it  was  distinctly  in- 
timated that  the  case  would  be  very  different  had  the  day  not  been 
stated  in  the  note.  It  was  regarded  as  an  absolute  promise  to  pay 
on  the  day  specified,  and  no  effect  was  given  to  the  words  that  the 
payee  would  then  become  of  age. 
The  judgment  must  be  reversed. 


COOKE  v.  COLEHAN. 

(Court  of  King's  Bench,  1744.     2  Str.  1217.) 

On  error  from  C.  B.  a  note  to  pay  to  A.  or  order,  six  weeks ^ after 
the  death  of  the  defendant's  father,  for  value  received,  was  held  to  be 
a  negotiable  note  within  the  statute  3  Anne,  c.  9,  for  there  is  no  con- 
tingency, whereby  it  may  never  become  payable,  but  it  is  only  uncertain 
as  to  the  time,  which  is  the  case  of  all  bills  payable  at  so  many  days 
after  sight.  In  Communi  Banco  it  held  three  arguments,  and  was  held 
good  upon  a  solemn  resolution  delivered  by  Chief  Justice  WiLLKS. 


LEADER  v.  PLANTE. 

(Supreme  Judicial  Court  of  Maine,  1901.     95  Me.  339,  50  Atl,  54,  85  Am.  St 

Rep.  415.) 

FoGLER,  J.*    This  is  an  action  of  assumpsit  by  the  indorsee  against 
the  maker  of  a  written  instrument,  declared  upon  as  a  promissory  note, 
of  the  following  tenor,  namely : 
"$406.  Auburn,  Maine,  August  30th,  1892. 

"Within  one  year  after  date  I  promise  to  pay  to  the  order  of  Rich- 
ard F.  Leader  four  hundred  and  six  dollars  at  with  interest.  Value 
received.  Telesphore  Plante." 

Witness :  "P.  H.  Kelleher." 

Indorsed :   "Richard  F.  Leader." 

The  writing  was  indorsed  and  delivered  by  the  payee  to  the  plaintiff 
January  2,  1893. 

It  is  claimed  in  defense  that  the  instrument  is  not  a  valid  negotiable 
promissory  note,  for  the  reason  that  the  time  of  payment  named  there- 
in is  not  stated  with  sufficient  certainty.    In  other  words,  it  is  contended 

8  Part  of  the  opinion  is  omitted. 


0-: 


CERTAINTY  AS  TO  THE  TERMS  OF  THE  ORDER  OR  PUOMISB     l-'.J 

that  "within  twelve  months"  is  too  uncertain  and  indefinite  as  to  time 
of  payment  to  give  the  instrument  the  character  of  a  negotiable  promis- 
sory note.  It  is  familiar  law  that,  to  constitute  a  negotiable  promissory 
note,  the  time  of  payment  must  be  stated  with  certainty.  It  is  also  a 
familiar  maxim  that  that  is  certain  which  can  be  made  certain. 

"A  valid  promissory  note  is  not  necessarily  negotiable.  To  make  it 
such  by  the  law  merchant  it  must  run  to  order  or  bearer,  be  payable 
in  money  for  a  certain  definite  sum,  on  demand,  at  sight,  or  in  a  cer- 
tain time,  or  upon  the  happening  of  an  event  which  must  occur,  and 
payable  absolutely,  and  not  upon  a  contingency."  Roads  v.  Webb,  91 
Me.  410,  40  Atl.  128,  64  Am.  St.  Rep.  246. 

It  is  well  settled  that  a  note  payable  at  the  death  of  the  maker  is 
a  valid  negotiable  promissory  note,  as  death  will  inevitably  occur,  and 
the  time  of  payment  can  thus  be  made  certain.  Martin  v.  Stone,  67  N. 
H.  367,  29  Atl.  845. 

"Within"  a  certain  period,  "on  or  before"  a  day  named,  and  "at  or 
before"  a  certain  day,  are  equivalent  terms,  and  the  rules  of  construc- 
tion apply  to  each  alike.  As  stated  by  Mr.  Justice  Strout  in  Roads  v. 
Webb,  supra;  the  question  whether  a  note  made  payable  "on  or  before" 
a  day  certain  states  the  time  of  payment  with  sufficient  certainty  to  con- 
stitute a  negotiable  note  has  not  been  decided  in  this  state. 

In  Cota  V.  Buck,  7  Mete.  (Mass.)  588,  41  Am.  Dec.  464,  a  note  "to 
be  paid  in  the  course  of  the  season  now  coming"  was  held  to  be  nego- 
tiable for  the  reason  that  the  "season  now  coming"  must  come  by 
mere  lapse  of  time. 

But  in  Hubbard  v.  Mosely,  11  Gray,  170,  71  Am.  Dec.  698,  the  court 
of  Massachusetts  held  that  a  promissory  note  payable  90  days  after 
date,  containing  a  stipulation  that  the  note  shall  be  given  up  to  the 
maker  as  soon  as  the  amount  of  it  is  received  by  the  payee,  is  not  nego- 
tiable ;  thus  practically  overruling  the  case  of  Cota  v.  Buck. 

The  late  Massachusetts  decisions  upon  this  point  follow  the  doctrine 
of  Hubbard  v.  Mosely.  Way  v.  Smith,  HI  Mass.  523;  Stults  v. 
Silva,  119  Mass.  137. 

Mr.  Justice  Cooley,  in  Mattison  v.  Marks,  31  Mich.  423,  18  Am. 
Rep.  197,  referring  to  Hubbard  v.  Mosely,  remarks:  "It  is  to  be  re- 
gretted, perhaps,  that  the  learned  judge  who  delivered  the  opinion  did 
not  deem  it  important  to  present  more  fully  the  reasons  that  led  him 
to  his  conclusions,  instead  of  contenting  himself  with  a  simple  refer- 
ence to  the  general  doctrine  that  a  promissory  note  must  be  payable 
at  a  time  certain." 

In  Jillson  v.  Hill,  4  Gray  (Mass.)  316,  it  was  held  that  a  note  pay- 
able "on  demand,  with  interest  within  six  months,"  was  a  promise  to 
pay  within  six  months  in  any  event,  and  sooner  if  demanded. 

We  think  that  the  great  weight  of  authority  and  of  reason  is  op- 
posed to  the  present  Massachusetts  doctrine. 


2Q  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

Mattison  v.  jNIarks,  supra,  was  a  suit  upon  a  written  instrument 
containing  a  promise  to  pay  a  sum  certain  "on  or  before''  a  day  named. 
It  was  contended  in  defense  that  it  was  not  a  promise  to  pay  on  a  day 
certain,  and  consequently  was  not  a  negotiable  promissory  note.  The 
court  held  that  the  instrument  was  a  negotiable  promissory  note.  Mr. 
Justice  Cooley,  in  delivering  the  opinion  of  the  court,  says :  "The 
legal  rights  of  the  holder  are  clear  and  certain.  The  note  is  due  at  a 
time  fixed,  and  it  is  not  due  before.  True,  the  maker  may  pay  sooner, 
if  he  shall  choose ;  but  this  option,  if  exercised,  would  be  a  payment 
in  advance  of  the  legal  liability  to  pay,  and  no  more.  Notes  like  this  are 
common  in  commercial  transactions,  and  we  are  not  aware  that  their 
negotiable  quality  is  ever  questioned  in  business  dealings." 

It  is  held  in  Curtis  v.  Horn,  58  N.  H.  504,  that  a  promissory  note, 
payable  "on  or  before  the  first  day  of  May  next,"  is  negotiable.  The 
court  say  in  the  opinion :  "It  is  now  the  common  law  that,  where  pay- 
ment is  made  to  depend  upon  an  event  that  is  certain  to  come,  and  un- 
certain only  in  regard  to  the  time  when  it  will  take  place,  the  note  or 
bill  is  negotiable."  The  court  say  further :  "The  recent  Massachusetts 
cases  cited  by  the  defendant  place  the  conclusions  arrived  at  upon  com- 
mon-law grounds ;  yet  they  fail  to  state  the  reasons  for  overruling  Cota 
V.  Buck,  and  the  law  as  held  in  other  jurisdictions,  and  we  are  unable  to 
see  any." 

The  doctrine  thus  laid  down  by  the  courts  of  Michigan  and  New 
Hampshire  is  fully  sustained  by  numerous  authorities,  of  which  we 
cite  Bates  v.  Leclair,  49  Vt.  230;  Riker  v.  Manufacturing  Co.,  14  R. 
I.  402,  51  Am.  Rep.  413;  Insurance  Co.  v.  Bill,  31  Conn.  534-538; 
Jordan  v.  Tate,  19  Ohio  St.  586 ;  Dorsey  v.  Wolff,  142  111.  589,  32  N. 
E.  495,  18  L.  R.  A.  428,  34  Am.  St.  Rep.  99;  Chicago  Ry.  Equipment 
Co.  v.  Merchants'  Bank,  136  U.  S.  268-285,  10  Sup.  Ct.  999,  34  L.  Ed. 
349;  Ernst  v.  Steckman,  74  Pa.  13,  15  Am.  Rep.  542. 

Our  conclusion  is  that  the  instrument  here  in  suit  is  a  valid,  nego- 
tiable, promissory  note.     *     *     * 

Judgment  for  plaintiff. 


WORDEN  V.  DODGE  et  al. 

(Supreme  Court  of  New  York,  1847.    4  Denio,  159,  47  Am.  Dec.  247.) 

Assumpsit.  On  the  trial  the  plaintiff  gave  in  evidence  an  agreement, 
signed  by  the  defendants,  bearing  date  October  12,  1839,  by  which,  for 
value  received,  they  jointly  and  severally  promised  to  pay  to  the  plain- 
tiff, by  his  name  or  order,  $250,  with  interest,  payable  one  half  in  two 
years  and  the  other  half  in  three  years  from  the  day  of  said  agreement, 
"out  of  the  net  proceeds,  after  paying  the  costs  and  expenses  of  ore  to 
be  raised  and  sold  from  the  bed  on  the  lot  this  day  conveyed  by  Ed- 
ward Madden  to  Edwin  Dodge,  which  bed  is  to  be  opened  and  the  ore 
disposed  of  as  soon  as  conveniently  may  be." 


CERTAINTY    AS   TO   THE    TERMS   OF   THE    ORDER    OR   PROMISE  27 

On  reading  the  agreement  the  plaintiff  rested,  and  the  defendants 
moved  for  a  nonsuit,  as  the  plaintiff  had  not  shown  that  the  defendants 
had  received  enough  from  the  ore  to  pay  the  note,  nor  had  they  shown 
any  default  or  negligence  on  their  part.  The  judge  held  that  the  plain- 
tiff could  not  recover  without  proving  that  the  defendants  had  received 
funds  from  the  ore  to  enable  them  to  pay,  or  had  neglected  to  work 
the  ore  bed,  and  directed  a  nonsuit. 

The  plaintiff  excepted. 

Beardsley,  J.  The  nonsuit  was  proper.  A  promissory  note  must 
be  payable  _absolutely,  and  not  upon  any  contingency  as  to  time  or 
event.  3  Kent  (5th  Ed.)  p.  74;  Smith  on  ^^lerc.  Law,  113,  116;  Storv 
on  Prom.  Notes,  §§  1,  22  to  26;  id.  on  Bills  of  Exch.  §§  46,  47;  Chit, 
on  Bills  (10th  Amer.  Ed.)  p.  132  to  139. 

This  was  not  such  an  engagement,  for  although  the  promise  was  to 
make  payments  at  certain  specified  times,  the  payments  were  to  be 
made  "out  of  the  net  proceeds"  "of  ore  to  be  raised  and  sold"  from  a 
certain  ore  bed.  Here  was  a  contingency;  the  fund  might  turn_out 
to  be  inadequate,  in  which  case  there  would  be  no  obligation  to  pay 
at  any  time.  It  was  not  a  promise  to  pay  "absolutely  and  at  all  events," 
as  a  promissory  note  always  is. 

New  trial  denied. 


FIRST  NAT.  BANK  OF  HUTCHINSON  v.  LIGHTNER. 

(Supreme  Court  of  Kansas,  190G.     74  Kan.  7.3G,  88  Pac.  59,  8  L.  R.  A.  [N.  S.] 

231,  lis  Am.  St.  Rep.  353.) 

The  court  made  the  following  special  findings  of  fact  and  conclu- 
sions of  law: 

''That  the  Snyder  Planing  Mill  Company  entered  into  a  contract  with 
the  defendant,  Lightner,  for  the  erection  of  a  certain  barn  at  the  con- 
tract price  of  $3,500.  That  prior  to  the  completion  of  said  barn,  and 
on  September  28,  1903,  the  Snyder  Planing  Mill  Company  was  duly  ad- 
judicated bankrupt,  and  the  defendant,  Lightner,  was  compelled  to  and 
did  complete  the  barn. 

"That  prior  to  the  adjudication  of  the  Snyder  Planing  Mill  Com- 
pany as  bankrupt,  at  the  request  of  said  company,  Lightner  accepted 
two  orders,  one  for  $1,000  and  one  for  $1,500  which  said  orders  and  ac- 
ceptances were  identical  with  the  exception  of  the  amounts  and  dates. 
The  one  for  $1,500  reads  as  follows  : 

"  'Hutchinson,  Kansas,  Aug.  10,  1903. 

"  'G.  W.  Lightner,  Offerle,  Kansas — Dear  Sir :  Pay  to  the  order  of 
the  First  National  Bank  of  Hutchinson,  Kansas,  on  account  of  con- 
tract between  you  and  the  Snyder  Planing  Mill  Co.  $1,500. 

"  'The  Snyder  Planing  Mill  Co., 

"  'Accepted.    G.  W.  Lightner.  Per.  J.  F.  Donnell,  Trcas.' 


28  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

"Said  two  orders,  so  accepted,  were  by  the  Snyder  Planing  Mill  Com- 
pany hypothecated  with  the  First  National  Bank  of  Hutchinson,  Kan., 
to  secure  two  certain  demand  notes  drawing  10  per  cent,  interest  and 
of  even  amounts  with  said  orders ;  the  $1,000  order  being  hypothecated 
about  August  22,  1903,  and  the  $1,500  order  on  or  about  August  11, 
1903.  That  the  proceeds  of  said  notes  were  at  said  dates  duly  received 
from  said  bank,  and  used  by  the  Snyder  Planing  Mill  Company.  Said 
notes  are  still  due  and  unpaid. 

"The  said  orders  were  so  accepted  by  Lightner  on  or  about  August 
10,  1903,  and  that  about  September  30th  Lightner  took  up  the  $1,000 
order  by  giving  therefor  his  check  for  $1,000  to  the  cashier  of  plaintiff, 
which  was  as  follows : 

"  'Kinsley,  Kansas,  Sept.  30,  1903. 

"  'The  National  Bank  of  Kinsley :  Pay  to  E.  W.  Eagan,  cashier,  or 
order,  $1,000.00.     One  thousand  dollars. 

"  'George  W.  Lightner.' 

"That  said  Lightner  stopped  payment  on  said  check  prior  to  its  pres- 
entation, and  no  part  thereof  has  been  paid,  nor  has  any  part  of  the 
$1,500  order  been  paid.  That,  prior  to  the  giving  of  the  two  orders, 
Lightner  paid  the  Snyder  Planing  Mill  Company  $1,000  upon  said  con- 
tract, and  that  he  was  compelled  to  expend  $1,624.04  to  complete  the 
barn.  That  there  was  a  balance  due  and  unpaid  on  said  contract  of 
$872.96  when  this  action  was  commenced. 

*  *  *  *  *  *  **  * 

"First.  That  said  orders  were  nonnegotiable,  and  were  subject  to 
the  same  defenses  in  the  hands  of  the  First  National  Bank  of  Hutchin- 
son, Kan.,  as  if  they  had  remained  in  the  hands  of  the  Snyder  Planing 
Mill  Company. 

"Second.  That  the  plaintiff  is  entitled  to  judgment  in  this  action  in 
the  sum  of  $970  with  interest  from  this  date  at  6  per  cent,  per  annum 
and  for  costs.  Chas.  E.  Lobdell,  Judge." 

Plaintiff"  brings  the  cause  here  upon  a  transcript,  and  alleges  error  in 
the  conclusions  of  law  upon  which  the  judgment  is  based  and  error  in 
overruling  the  motion  for  a  new  trial.® 

Porter,  J.  (after  stating  the  facts  as  above).  The  main  controversy 
is  whether  the  orders  given  by  the  planing  mill  company  to  the  bank, 
and  accepted  by  defendant,  are  negotiable  instruments.  It  is  true  that 
no  specific  time  of  payment  is  mentioned,  but  that  does  not  affect  their 
validity  as  such  instruments,  and,  where  no  date  is  mentioned,  they 
are  payable  on  dernand.  4  A.  &  E.  Enc.  of  Law  (2d  Ed.)  133  and  note 
3;  Douglass  v.  Sargent  &  Bro.,  32  Kan.  413,  4  Pac.  861.  Each  of 
them,  therefore,  possesses  all  the  essential  elements  of  a  bill  of  ex- 
change unless  the  words  quoted  make  them  payable  out  of  a  particulax. 
fund  and  conditionally  so  that  the  acceptance  is  thereby  qualified. 

»  The  statement  of  the  case  is  abridged. 


CERTAINTY    AS   TO    THE   TERMS    OF   THE    ORDER    OR    PROMISE  29 

The  law  is  well  settled  that  a  bill  or  note  is  not  negotiable  if  made 
payable  out  of  a  particular  fund.  1  Daniel  on  Neg.  Inst.  (5th  Ed.)  § 
50;  White  v.  Gushing,  88  Me.  339.  34  Atl.  164,  32  L.  R.  A.  590,  51 
Am.  St.  Rep.  402.  But  a  distinction  is  recognized  where  the  instrument 
is  simply  chargeable  to  a  particular  account.  In  such  a  case  it  is  beyond 
question  negotiable ;  payment  is  not  made  to  depend  upon  the  suffi- 
ciency of  the  fund  mentioned,  and  it  Is  mentioned  only  for  the  purpose 
of  informing  the  drawee  as  to  his  means  of  reimbursement.  1  Daniel 
on  Neg.  Inst.  (5th  Ed.)  §  51 ;  Ticdeman  on  Bills  &  Notes,  §  20.  In 
Ridgely  Bank  v.  Patton  et  al.,  109  111.  479,  it  is  said:  "A  bill  or  note, 
without  affecting  its  character  as  such,  may  state  the  transaction  out  of 
which  it  arose,  or  the  consideration  for  which  it  was  given."  "So,  also, 
the  insertion  into  a  bill  or  note  of  memoranda,  explaining  the  nature 
of  the  business  or  debt,  for  which  the  instrument  is  given,  will  not  make 
it  nonnegotiable,  for  such  a  memorandum  does  not  make  the  payment 
conditional."    Tiedcman  on  Com.  Paper,  §  26. 

The  test  in  every  case  is  said  to  be :  "Does  the  instrument  carry  the 
general  personal  credit  of  the  drawer  or  maker,  or  only  the  credit 
of  a  particular  fund?"  4  A.  &  E.  Enc.  of  Law,  89.  A  promise  to 
pay  a  certain  sum  "out  of  my  next  quarter's  mail  pay,  which  becomes 
due  January  1,  1883,"  was  held  in  Nichols  v.  Ruggles,  76  Me.  25,  to 
be  an  absolute  promise  to  pay  a  certain  sum  of  money.  In  Haussoul- 
lier  against  Hartsinck,  7  Term  R.  (Durnford  &  East),  7ZZ,  it  was  held 
that  an  instrument  promising  to  pay  a  certain  sum  "being  a  portion  of 
a  value,  as  under  deposit  in  security  for  the  payment  hereof,"  was  a 
promissory  note  payable  at  all  events.  In  Pierson  v.  Dunlop,  2  Cowp. 
571,  an  order  which  was  to  be  charged  "to  freight"  was  held  nego- 
tiable. A  note  expressed  to  be  in  payment  of  certain  tracts  of  land 
was  held  negotiable.  Bank  v.  Michael  96  N.  C.  53,  1  S.  E.  855.  Like- 
wise a  note  which  stated  that  it  was  given  in  consideration  of  certain 
personal  property,  the  title  of  which  was  not  to  pass  unless  the  note  was 
paid.  Chicago  Railway  Co.  v.  Merchants'  Bank,  136  U.  S.  268,  10 
Sup.  Ct.  999,  34  L.  Ed.  349. 

This  court  held  in  Clark  v.  Skeen,  61  Kan.  526,  60  Pac.  327,  49 
L.  R.  A.  190,  78  Am.  St.  Rep.  oZ7,  that  "a  note  for  the  payment  of  a 
certain  sum  at  a  fixed  date  is  not  rendered  nonnegotiable  by  a  stipula- 
tion that,  upon  default  in  the  payment  of  interest,  the  whole  amount 
shall  become  due  at  the  option  of  the  holder,  and  then  draw  a  greater 
rate  of  interest."  In  Corbett  v.  Clark  and  Another,  45  Wis.  403,  30 
Am.  Rep.  763,  an  order  to  pay  a  certain  sum  "and  take  the  same  out  of 
our  share  of  the  grain,"  referring  to  grain  harvested  or  growing  on 
certain  farms,  accepted  by  the  drawee,  was  said  to  be  a  valid  bill  of 
exchange,  and  the  order  and  acceptance  absolute,  the  words  above 
quoted  merely  indicating  the  means  of  disbursement.  In  Redman  v. 
Adams.  51  Me.  429,  a  bill  directing  the  drawee  to  charge  the  amount 


no  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

c'gainst  the  drawer's  share  of  fish  caught  on  a  certain  schooner  is  held 
valid  and  negotiable. 

One  of  the  leading  cases  is  Macleed  v.  Snee,  2  Str.  765.  There  a 
bill  of  exchange  was  dated  May  25th  for  the  payment  of  a  certain  sum 
one  month  after  date,  "as  my  quarterly  half-pay  to  be  due  from  24th  of 
Tune  to  27th  of  September  next,  by  advance."  This  was  held  a  nego- 
tiable bill  of  exchange.  In  Spurgin  v.  McPheeters,  42  Ind.  527,  an  in- 
strument in  the  following  form  was  said  to  possess  all  the  requisites  of 
a  bill  of  exchange :  Greencastle,  Ind.,  Aug.  22d,  1870.  Mr.  D.  M.  Spur- 
gin— Sir,  please  pay  to  Jesse  McPheeters,  or  order,  the  sum  of  one 
hundred  and  nineteen  dollars  on  said  bill  of  1%  in.  lumber,  and  oblige 
the  firm  of  Geo.  W.  Hinton  &  Co."  In  Whitney  v.  Eliot  National  Bank, 
137  :\Iass.  351,  50  Am.  Rep.  316,  the  drafts  or  bills  of  exchange  were 
in  the  ordinary  form  except  that  they  contained  the  direction  to  "charge 
the  same  to  account  of  250  bbls.  meal  ex  schooner  Aurora  Borealis." 
The  court  said :  "This  direction  to  charge  the  amount  of  the  bills  to  a 
particular  account,  we  think,  does  not  make  them  payable  conditionally, 
or  out  of  a  particular  fund ;  they  are  still  payable  absolutely,  and  are 
negotiable,  and  do  not  constitute  an  assignment  of  a  particular  fund, 
or  of  a  part  of  a  particular  fund.  *  *  *  Macleed  v.  Snee,  2  Str. 
762;  Redman  v.  Adams,  51  Me.  429;  Corbett  v.  Clark,  45  Wis.  403, 
30  Am.  Rep.  763 ;  Coursin  v.  Ledlie,  31  Pa.  506;  Spurgin  v.  McPheet- 
ers, 42  Ind.  527." 

The  rule  with  regard  to  words  which  refer  to  the  consideration  is 
well  stated  in  Siegel  et  al.  v.  Chicago  Trust  &  Sav.  Bank,  131  111.  569, 
23  N.  E.  417,  7  L.  R.  A.  537,  19  Am.  St.  Rep.  51,  as  follows:  "The 
mere  fact  that  the  consideration  for  which  a  promissory  note  is  given 
is  recited  in  it,  although  it  may  appear  thereby  that  it  was  given  for 
or  in  consideration  of  an  executory  contract,  or  promise  on  the  part 
of  the  payee,  will  not  destroy  the  negotiability  of  the  note,  unless  it 
appears  through  the  recital  that  it  qualifies  the  promise  to  pay,  and 
renders  it  conditional  or  uncertain,  either  as  to  the  time  of  payment  or 
the  sum  to  be  paid."  The  following  authorities  are  also  in  point :  Mat- 
thews v.  Crosby,  56  N.  H.  21 ;  Shepard  v.  Abbott,  137  Mass.  224;  Id., 
179  Mass.  300,  60  N.  E.  782;  Schmittler  v.  Simon,  101  N.  Y.  554,  5 
N.  E.  452,  54  Am.  Rep.  717 ;  Hillstrom  v.  Anderson,  46  Minn.  382,  49 
N.  W.  187;  Bank  of  Kentucky  v.  Sanders  &  Wier,  3  A.  K.  Marsh. 
(Ky.)  184,  13  Am.  Dec.  149;  4  A.  &  E.  Enc.  of  Law,  89;  7  Cyc.  580. 

Our  negotiable  instrument  law  (chapter  70,  §  10;  Gen.  St.  1905, 
§  4542),  which  is  merely  declaratory  of  the  common  law  upon  the 
subject,  reads  as  follows:  "When  promise  is  unconditional.  An 
unqualified  order  or  promise  to  pay  is  unconditional,  within  the 
meaning  of  this  act,  though  coupled  with  (1)  an  indication  of  a 
particular  fund  out  of  which  reimbursement  is  to  be  made,  or  a 
particular  account  to  be  debited  with  the  amount ;  or  (2)  a  state- 
ment of  the  transaction  which  gives  rise  to  the  instrument;    but 


CERTAINTY    AS   TO    THE   TERMS    OF   THE    ORDER    OR    PROMISE  31 

an  order  or  promise  to  pay  out  of  a  particular  fund  is  not  uncon- 
ditional." Plaintiff  and  defendant  agree  upon  the  abstract  propo- 
sition of  law  involved  in  the  controversy.  Counsel  for  defendant 
concedes  that  an  instrument,  negotiable  in  itself,  is  not  changed  in 
character,  or  rendered  nonncgotiable  "by  a  recital  of  the  consider- 
ation or  a  direction  as  to  how  the  drawee  shall  reimburse  himself," 
but  insists  that  the  insertion  of  the  words  "on  account  of"  has  the 
same  effect  as  the  words  "out  of  the  proceeds  of."  The  controver- 
sy is  thus  narrowed  down  to  whether  the  words  "on  account  of 
contract  between  you  and  the  Snyder  Planing  Mill  Co."  amount 
to  a  direction  to  pay  out  of  a  particular  fund,  or,  on  the  other 
hand,  are  to  be  considered  as  simply  indicating  the  fund  from 
which  the  drawee,  Lightner,  might  reimburse  himself. 

Many  of  the  cases  attach  but  little  importance  to  the  words  "ac- 
count of,"  and  give  the  same  eft'ect  to  them  as  to  the  words  "out 
of."  7  Cyc.  579.  In  the  case  of  Pitman  v.  Breckenridge  &  Craw- 
ford, 3  Grat.  (Va.)  127,  cited  by  defendant,  the  phrase,  "on  ac- 
count of  brick  work  done,"  on  a  certain  building,  was  held  to  be  a 
direction  to  pay  out  of  a  particular  fund.  The  case  itself  is  of  little 
value  as  an  authority;  it  cites  no  cases,  gives  no  reason,  and  sim- 
ply holds  the  bill  nonncgotiable.  The  language  in  Brill  et  al.  v. 
Tuttle,  81  N.  Y.  454,  457,  37  Am.  Rep.  515  ("and  charge  the  same  to 
our  account  for  labor  and  materials  performed  and  furnished"),  was 
held  to  be  ambiguous,  and  other  circumstances  were  considered  as 
controlling.  The  bill  was  held  not  negotiable.  The  following  or- 
der was  held  not  negotiable,  in  Conroy  v.  Ferree,  68  Minn.  325,  71 
N.  W.  383,  but  the  opinion  merely  states  that  the  order  is  drawn 
upon  a  special  fund  without  any  discussion  of  the  reasons:  Star- 
buck,  Minn.,  Sept.  14,  1895.  T.'E.  Thompson  and  C.  L.  Brevig— 
Pay  to  the  order  of  A.  G.  Englund  one  hundred  fifty  dollars  ($150.- 
00)  on  earnings  for  the  threshing  season  of  1895,  whatever  they 
may  be,  and  charge  to  the  account  of  A.  H.  Ferree.  $150.00.  Ac- 
cepted Sept.  14,  1895.    By  C.  L.  Brevig." 

We  are  of  the  opinion  that  these  orders  cannot  be  construed  as 
drawn  upon  a  particular  fund.  Beyond  question,  there  are  many 
authorities  which  hold  similar  expressions  to  indicate  an  intention 
to  charge  a  particular  fund.  See  Banbury  v.  Lisset,  2  Str.  1211  ; 
Averett's  Adm'r  v.  Booker,  15  Grat.  (Va.)  163,  76  Am.  Dec.  203; 
Rice  V.  Porter's  Adm'rs,  16  N.  J.  Law,  440;  7  Cyc.  578  (b).  The 
weight  of  authority  and  reason  supports  the  proposition  that  the 
words  amount  to  no  more  than  an  indication  of  the  fund  from 
which  the  drawee  is  to  reimburse  himself.  The  words  used  are 
substantially  the  same  as  though  the  orders  read  "and  charge  to 
account  of  contract  with  Snyder  Planing  Mill  Company,"  or  "cred- 
it to  account  of  contract,"  etc.  The  $1,000  check  we  consider  in 
the  same  light  as  the  order  for  which  it  was  substituted. 

Defendant  in   error  argues  that  certain  collateral  circumstances 


33  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

appearing  in  the  evidence  must  be  taken  into  consideration  ;  among 
other  things,  the  fact  that  the  bank  held  these  orders  for  a  time  aft- 
er their  execution  as  indicating  the  intention  with  which  the  or- 
ders were  taken.  It  is  argued  that  there  being  an  ambiguity  in 
the  language,  we  must  consider  the  construction  placed  upon  these 
orders  by  the  parties  themselves.  This  case  is  here  upon  a  tran- 
script which  contains  none  of  the  evidence,  merely  the  pleadings, 
findings  of  fact  and  of  law,  the  judgment  and  motion  for  a  new 
trial.  Had  the  trial  court  rested  the  decision  upon  the  existence 
of  these  outside  matters  the  findings  of  fact,  which  are  very  com- 
plete, would  doubtless  have  referred  to  them.  The  conclusions  of 
law  are  so  framed  as  to  leave  no  doubt  that  the  court  held  the  in- 
struments to  be  nonnegotiable  on  account  of  the  language  used 
in  the  instruments  themselves.  In  our  view  they  were  negotiable 
and  the  language,  moreover,  not  even  ambiguous.  It  follows  that 
defendant  was  not  entitled  to  recoup  his  damages  for  the  failure 
to  complete  the  barn ;  and  the  findings  of  the  court,  therefore,  re- 
quire a  judgment  for  plaintiff  for  the  amount  due  upon  the  order, 
and  the  $1,000  check. 

The  cause  will,  therefore,  be  reversed  and  remanded,  with  direc- 
tions to  enter  judgment  in  favor  of  plaintiff.  All  the  Justices  con- 
curring. 


WHITE  V.   SMITH. 

(Supreme  Court  of  Illinois,  1875.     77  111.  351,  20  Am.  Eep.  251.) 

Mr.  Justice  Sheldon  delivered  the  opinion  of  the  court. 

This  was  an  action,  brought  by  plaintiff  below,  as  assignee,  upon 
the  following  instrument  in  writing: 
"$50.00  Monticello,  111.,  April    17,  1866. 

"For  value  received,  I  promise  to  pay  to  the  Monticello  Rail- 
road Company,  or  order  the  sum  of  $50,  to  be  paid  in  such  install- 
ments and  at  such  times  as  the  directors  of  said  company  may, 
from  time  to  time,  assess  or  require.  J.  W.  White." 

The  declaration  averred  that  the  directors,  on  the  1st  of  June, 
1866,  made  an  assessment  of  5  per  cent.,  which  was  paid;  on  the 
7th  of  May,  1867,  another  assessment  of  10  per  cent.,  which  was 
paid;  on  the  7th  of  January,  1868,  another  assessment  of  35  per 
cent.,  of  which  there  was. notice  to  defendant,  demand,  and  refus- 
al of  payment;  and  that,  on  January  6,  1869,  another  assessment 
of  50  per  cent,  was  made,  and  like  notice,  demand,  and  refusal  of 
payment,  the  several  assessments  amounting  to  the  whole  sum  of 
money  in  the  instrument  mentioned,  and  that  afterwards  the  in- 
strument was  indorsed  and  assigned  to  the  plaintiff. 

The  court  below  overruled  a  demurrer  to  the  declaration  and 
rendered  judgment  for  the  plaintiff. 


CERTAINXr   AS   TO   THE   TERMS   OP  THE    ORDER   OR   PROMISE  33 

The  error  assigned  is  the  overruling  of  the  demurrer,  and  the 
question  made  is  whether  the  instrument  in  suit  is  a  negotiable 
promissory  note. 

Plaintiff  in  error  asserts  it  not  to  be,  because,  by  its  terms,  it  is 
uncertain  whether  the  money  will  ever_h^ecoiiifi4iiiyable_or  not;  that 
the  payment  (kpmded  on  an  act  to  be  performed  by  the  directors 
which  act  niii;lit  never  be  performed  by  them,  or  that  the  railroad 
company,  from  some  cause,  might  cease  to  exist  before  any  as- 
sessment  had  been  made  by  the  directors^ 

The  principle  is  undoubted,  that,  to  constitute  a  valid  promis- 
sory note,  it  must  he  lor_the  payment  of  money  which  will  cer- 
tainly become  due  and  payable  one  time  or  other,  though  it  may' 
be  uncertain  when  that  time  will  come.  And  where  the  payment 
depends  upon  a  contingency,  it  will  make  no  difference  that  the 
contingency  does,  in  fact,  happen  afterwards,  on  which  the  pay- 
ment is  to  become  absolute,  for  its  character  as  a  promissory  note 
cannot  depend  upon  future  events,  but  solely  upon  its  character 
when  created. 

The  instrument  in  question  does,  seemingly,  depend  for  its  pay- 
_ment_apon_^  contingency.  But  there  is  a  class  of  cases,  says  Judge 
Story,  "which,  at  first  view,  seem  to  import  that  payment  is  to  be 
made  only  upon  the  occurrence  of  events  which  may  never  hap- 
pen, and  yet  which  are  uniformly  held  to  be  absolutely  payable  at 
all  events.  Thus,  if  a  note  be  made  payable  at  sight,  or  at  10  days 
after  sight,  or  in  10  days  after  notice,  or  on  request  or  on  demand. 
in  all  these  and  the  like  cases  the  note  will  be  held  valid  as  a  prom- 
issory note  and  payable  at  all  events,  although,  in  point  of  fact, 
the  payee  may  die  without  ever  having  presented  the  note  for 
sight,  or  without  having  given  any  notice  to  or  made  any  request 
or  demand  upon  the  maker  for  payment.  But  the  law,  in  all  cases 
of  this  sort,  deems  the  note  to_admit  a  present  debt  to  be  due  to 
the  pa}  cc,  and  pay.iljle  absolutely  and  at  all  events,  whenever  or 
by  whomsoever  the  note  is  presented  for  payment  according  to  its 
purport."    Story,  Prom.  Notes,  §  29. 

We  are  inclined  to  hold  that  this  instrument  may  be  regarded 
as  one  falling  under  this  class.  The  money  here  is  payable  to  the 
company  in  such  installments  and  at  such  times  as  its  directors 
,  may  from  time  to  time  require.  The  directors  are  the  managing 
officers  of  the  corporation,  so  that  the  money  is  really  payable  in 
such  installments  and  at  such  times  as  the  payee  may  require.  It 
was.  in  effect,  payable  on  demand,  or  in  installments  on  demand. 
In  the  case  of  a  note  payable  "on  having  twelve  months'  notice," 
it  might  be  said  that  it  was  not  certain  that  notice  would  ever  be 
given.  In  reference  to  a  note  so  payable  "on  having  twelve 
months'  notice,"  Abbott,  C.  J.,  in  Clayton  v.  Gosling,  5  Barn.  & 
C.  360,  said :  "Nor  is  the  time  of  payment  contingent,  in  the  strict 
Moore  Cases  B.&  X.— 3 


34  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

sense  of  the  expression,  for  that  means  a  time  which  may  or  may 
not  arrive.  This  note  was  made  payable  at  a  time  which  we  must 
suppose  would  arrive."  The  same,  we  think,  with  equal  truth, 
may  be  said  in  respect  to  the  present  note. 

We  cannot  well  distinguish,  in  principle,  this  case  from  the  one 
of  Goshen  Turnpike  Co.  v.  Hurtin,  9  Johns.  (N.  Y.)  217,  6  Am.  Dec. 
273.  The  promise  there  was  to  pay  the  company  $125  for  five 
shares  of  the  capital  stock  of  the  corporation,  in  such  manner  and 
proportion  and  at  such  time  and  place  as  the  president,  directors 
and  company  should  from  time  to  time  require.  It  was  held  that 
the  note  was  a  good  promissory  note  within  the  statute,  the  stat- 
ute there,  relative  to  promissory  notes,  being  the  same  in  sub- 
stance as  that  of  3  &  4  Anne ;  that  the  note_was  payable  absolute- 
ly, and  not  depending  on  any  contingency ;  that  it  was,  in  effect, 
pavable  on  demand.  See,  also,  Dutchess  Cotton  Manufactory  v. 
Davis,  14  Johns.  (N.  Y.)  238,  7  Am.  Dec.  459. 

We  are  disposed  to  hold  that  there  was  no  error  in  overruling 
the  demurrer,  and  the  judgment  will  be  affirmed. 

Judgment  affirmed. 


WISCONSIN  YEARLY  MEETING  OF  FREEWILL  BAP- 
TISTS V.  BABLER. 

(Supreme  Court  of  Wisconsin,  1902.     115  Wis.  2S9,  91  N.  W.  678.) 

This  is  an  action  in  equity,  brought  by  the  respondent,  a  corpora- 
tion, to  set  aside  the  sale  and  transfer  to  the  appellant  of  a  certain 
promissory  note  and  mortgage,  which  was  the  property  of  the  re- 
spondent, and  to  recover  the  possession  of  the  same.  The  case  was 
tried  by  the  court,  and  the  evidence  showed  that  the  respondent 
was  a  religious  corporation  organized  under  chapter  23  of  the  Pri- 
vate and  Local  Laws  of  Wisconsin  for  1867,  and  had  a  board  of  six 
trustees,  its  active  officers  being  a  president,  secretary,  and  treas- 
urer; that  said  corporation  never  adopted  any  by-laws  as  to  the 
management  of  its  affairs,  and  had  no  principal  office ;  that  from 
time  to  time  it  received  donations  of  money,  which  the  trustees  put 
in  the  care  of  the  treasurer,  to  be  loaned,  and  the  interest  to  be 
used  for  the  support  of  weak  churches  and  indigent  ministers  of 
the  denomination ;  that  one  J.  F.  Sears  was  treasurer  of  the  corpo- 
ration from  the  year  1896  up  to  June  1,  1901,  when  he  died;  that 
on  March  15,  1901,  Sears  loaned  to  one  Prisk,  from  the  funds  of  the 
coiporation,  $4,800,  and  took  a  note  therefor,  payable  to  the  order 
of  "J.  F.  Sears,  Treas.,  or  his  successor,"  payable  five  years  after 
date,  with  interest  at  5^/2  per  cent. ;  that  such  note  contained  a 
power  of  attorney,  which  authorized  a  confession  of  judgment  at 
any  time  thereafter,  whether  due  or  not ;  and  said  note  was  se- 
cured by  a  real  estate  mortgage  in  which  the  mortgagee  is  describ- 


CERTAINTY  AS  TO  THE  TERMS  OF  THE  ORDER  OR  I'RO.MISE     35 

cd  as  "J-  F-  Sears,  Treas.,  or  his  successor  in  office  of  the  Wisconsin 
Yearly  Meeting  of  Freewill  Baptists";  that  on  April  22,  1901,  Sears 
sold  and  delivered  said  note  and  mortgage  to  appellant  for  the  sum 
of  $4,827.13,  the  appellant  paying  therefor  $3,900  in  checks,  and 
turning  over  to  Scars  two  notes  of  $500  each,  which  had  before  that 
time  been  given  by  Sears  to  the  appellant  for  borrowed  money, 
Sears  paying  back  to  the  appellant  $133.53;  that  the  appellant. 
Babler,  could  not  read  English,  but  that  the  note  was  read  to  him 
by  Sears,  and  that  the  mortgage  was  present,  and  delivered  at  the 
same  time,  but  was  not  read  by  Babler;  that  Scars  converted  the 
money  which  he  received  from  Babler  to  his  own  use,  and  that  the 
corporation  has  received  no  part  of  it;  that  the  sale  of  the  note 
and  mortgage  to  the  appellant  was  unauthorized,  and  without  the 
knowledge  of  the  trustees;  that  Babler  neglected  to  make  inquiry 
as  to  whether  Sears  had  authority  to  sell  the  note  in  question. 

Upon  these  facts  the  circuit  court  found  that  the  defendant  was 
negligent  in  purchasing  the  note  and  mortgage  without  inquiry ; 
that  the  note  was  nonnegotiable ;  and  that  the  plaintiff  was  entitled 
to  a  judgment  setting  aside  the  transfer  of  the  note  and  mortgage, 
and  adjudging  that  the  same  be  delivered  by  the  defendant  to  the 
plaintiff.     From  this  judgment  the  defendant  appeals. ^'^ 

WiNSLOVk^,  J.  (after  stating  the  facts  as  above).  It  is  entirely  clear 
from  the  evidence  in  the  case  and  from  the  findings  of  fact  that  the 
note  and  mortgage  in  question  were  the  property  of  the  plaintiff 
corporation,  and  thatjio  express  authority  had  ever  been  given  to 
Sears  to  sell  them.  These  being  the  facts,  the  defendant,  Babler, 
could  acquire  no  title  to  the  note  by  his  transaction  with  Sears  un- 
less the  note  was  negotiable  paper,  or  unless  Sears  had  either  the 
apparent  ownership  or  apparent  authority  to  sell  it,  so  that  the  cor- 
poration would  be  estopped  to  deny  the  act.  It  is  quite  certain  that 
the  note  was  not  negotiable,  because  by  the  power  of  attorney 
whichjt  contained  judgment  ..could  be  entered  upon  it  at  any  time 
after  its  date,~whether  due  or  not.  Thus  the  time  of  payment  de- 
pends upon  the  whim  or  caprice  of  the  holder, .and  is  absolutely  un- 
certain. This  deprives  the  note  of  its  negotiability.  Continental 
Nat.  Bank  v.  IMcGeoch,  73  Wis.  332,  41  N.  W.  409';  W.  W.  Kim- 
ball Co.  V.  Mellon,  80  Wis.  133,  48  N.  W.  1100. 

Chapter  356,  Laws  1899  (the  negotiable  instrument  law),  pro- 
vides that  the  negotiable  character  of  an  instrument  is  not  affected 
by  a  provision  authorizing  a  confession  of  judgment  if  the  instru- 
ment is  not  paid  at  maturity.  .Section  1675 — 5,  subd.  2.  Upon  fa- 
miliar principles  of  statutory  construction  this  provision  makes  a 
note  like  the  present  nonnegotiable.  Nor  can  it  be  said  that  Sears 
had  such  apparent  ownership  or  authority  to  sell  the  note  as  would 

10  The  arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


36  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

estop  the  plaintiff  corporation  from  denying  his   act.     The  note, 
upon  its  face,  shows  that  it  was  held  by  Sears  in  a  representative 
capacity  merely.    *    *    * 
Judgment  affirmed. 


THORP  V.  MINDEMAN  et  al. 

(Supreme  Court  of  Wisconsin,  1904.     123  Wis.  149,  101  N.  W.  417,  C8  L.  R.  A. 

14G,  107  Am.  St.  Rep.  1003.) 

This  is  an  action  to  foreclose  a  note  and  mortgage  given  by  the 
defendants  IMindeman  and  wife  to  one  Henry  Herman,  the  defense 
being  an  entire  want  of  consideration.  The  note  was  a  prom.issory 
note  for  $6,500,  dated  December  11,  1900,  payable  three  years  after 
date,  with  interest  at  5  per  cent,  per  annum,  semiannually,  and 
contained  the  following  provisions  inserted  before  the  signature : 
"The  payment  of  this  note  is  secured  by  a  mortgage  of  even  date 
herewith  on  real  estate.  If  default  shall  be  made  in  the  payment  of 
interest,  or  in  case  of  failure  to  comply  with  any  of  the  conditions 
or  agreements  of  the  mortgage  collateral  hereto,  then  the  whole 
amount  of  the  principal  shall,  at  the  option  of  the  mortgagee,  or  his 
representatives  or  assigns,  (notice  of  such  option  being  hereby  ex- 
pressly waived),  become  due  and  payable  without  any  notice  what- 
ever." 

The  mortgage  accompanying  the  note  contained  the  following 
provisions:  "Provided,  always,  and  these  presents  are  upon  this 
express  condition,  that  if  the  said  parties  of  the  first  part,  their  heirs, 
executors  and  administrators,  shall  pay  or  cause  to  be  paid  to  the 
said  party  of  the  second  part,  his  heirs,  executors,  administrators 
or  assigns,  the  just  and  full  sum  of  sixty-five  hundred  ($6,500)  dol- 
lars three  years  after  date  with  interest  at  5  per  cent,  per  annum, 
interest  payable  semiannually  according  to  the  conditions  of  one 
promissory  note  and  coupons  bearing  even  date  herewith,  executed 
by  the  said  George  Mindeman,  one  of  the  parties  of  the  first  part, 
to  the  said  party  of  the  second  part,  and  shall  moreover  pay  annual- 
ly to  the  proper  officers  all  taxes  which  shall  be  assessed  on  the 
said  premises  and  shall  deliver  or  exhibit  receipts  therefor  to  said 
party  of  the  second  part,  his  heirs,  executors,  administrators  or  as- 
signs, on  or  before  the  first  day  of  May  next  after  such  taxes  shall 
have  become  due  and  payable,  and  shall  insure  and  keep  insured  the 
buildings  thereon  or  to  be  hereafter  erected  against  loss  or  dam- 
age by  fire  in  the  sum  of  eight  thousand  dollars  or  over,  in  insur- 
ance companies  to  be  approved  by  the  said  party  of  the  second  part, 
his  heirs,  executors,  administrators  or  assigns,  such  insurance  to 
be  payable  in  case  of  loss  to  the  said  party  of  the  second  part,  his 
heirs,  executors,  administrators  or  assigns,  as  his  mortgage  interest 
may  appear,  and  the  policy  or  policies  of  insurance  to  be  held  by 


CERTAINTT   AS   TO   TUE   TERMS   OF   THE   OEDER   OR   PROMISE  37 

him,  and  in  default  thereof  it  shall  be  lawful  for  the  said  party  of 
the  second  part,  his  heirs,  executors,  administrators  or  assigns,  to 
effect  such  insurance,  and  the  premiums  and  other  legal  expenses 
and  charges  paid  for  affecting  the  same,  together  with  interest 
thereon  at  the  rate  of  10  per  cent,  per  annum,  shall  be  a  lien  upon 
the  said  mortgaged  premises  added  to  the  amount  of  the  said  note, 
and  secured  by  these  presents  until  the  payment  of  said  note,  then 
these  presents  shall  be  null  and  void.  But  in  case  of  the  non-pay- 
ment of  any  sum  of  money  (either  principal,  interest  or  taxes)  at 
the  time  when  the  same  shall  become  due,  or  of  failure  to  insure 
said  building  agreeably  to  the  conditions  of  these  presents,  or  in 
case  of  failure  to  deliver  or  exhibit  such  receipt  as  above  provided, 
or  in  case  of  failure  on  the  part  of  said  parties  of  the  first  part  to 
keep  or  perform  any  other  agreement,  stipulation  or  condition  here- 
in contained,  then  in  each  case  or  all  such  cases,  the  wdiole  amount 
of  the  said  principal  sum  shall,  at  the  option  of  the  said  party  of 
the  second  part,  his  heirs,  executors,  administrators  or  assigns, 
which  may  be  exercised  at  any  time  after  any  default,  without  any 
notice  whatever  to  the  mortgagors,  or  either  of  them,  their  heirs, 
executors,  administrators,  or  assigns,  service  or  giving  such  notice 
in  any  manner  being  hereby  expressly  waived,  be  deemed  to  have 
become  due,  and  the  same  with  interest  thereon  at  the  rate  afore- 
said shall  thereupon  be  collectible  in  a  suit  at  law  or  by  foreclosure 
of  this  mortgage,  in  the  same  manner  as  if  the  whole  of  said  prin- 
cipal sum  had  been  made  payable  at  the  time  when  any  such  failure 
shall  occur  as  aforesaid." 

It  appeared  from  the  testimony  of  the  defendant  Mindeman,  which 
was  taken  under  objection,  that  the  note  and  mortgage  was  given  to 
cover  advances  tq_  be  made  to  him  layTTefiiian,  but  that  none  were 
ever  in  fact  made.  September  11,  1902,  Herman  sold  the  note  and 
mortgage  to  the  plaintiff,  who  was  an  innocent  purchaser  thereof,  and 
made  the  following  indorsement  upon  the  note : 

"For  value  received,  I  hereby  sell,  transfer  and  assign  the  within 
note  and  the  interest  coupons  thereto  attached  and  numbered  four  to 
six  inclusive,  (previous  interest  coupons  having  been  paid  and  sur- 
rendered), to  Josephine  Thorp,  without  recourse." 

Findings  and  judgment  of  foreclosure  were  made  and  signed,  and 
the  Mindemans  appeal  from  the  judgment  as  well  as  from  a  subsequent 
order  appointing  a  receiver.^^ 

WixsLOW,  J.  (after  stating  the  facts  as  above).  The  important  ques- 
tion in  this  case  is  whether  the  note  in  suit  is  negotiable.  The  appel- 
lants argue  that  the  note  and  mortgage  must  be  construed  together  as 
one  contract ;  that,  so  construed,  the  note  requires  the  performance  of 
other  acts  besides  the  payment  of  money,  and  is  rendered  uncertain 
both  as  to  amount  and  time  of  payment,  and  hence  is  nonnegotiable. 

11  Part  of  the  opinion  is  omitted. 


38  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

The  general  rule  that  agreements  contemporaneously  executed  and  per- 
taining to  the  same  subject-matter  are  to  be  construed  together  is  so 
familiar  and  so  frequently  acted  upon  that  it  needs  only  to  be  stated. 
The  question  how  far,  if  at  all,  this  rule  imports  into  a  promissory 
note  the  collateral  agreements  contained  in  an  accompanying  mortgage, 
is  the  question  to  be  considered  in  this  case. 

The  collateral  agreements  contained  in  the  mortgage,  which  the  ap- 
pellants claim  are  imported  into  the  note  and  destroy  its  negotiability, 
are:    First,  the  agreement  that,  in  case  of  failure  by  the  mortgagor 
to  insure  the  buildings  in  the  mortgagee's  favor  in  approved  insurance 
companies,  the  mortgagee  may  insure  the  same,  and  the  premiums  paid 
shall  be  a  lien  on  the  premises  "added  to"  the  amount  of  the  note; 
and,  second,  the  agreement  that  in  case  of  failure  to  so  insure,  or  to 
pay  interest  or  taxes  when  due,  or  to  deliver  or  exhibit  tax  receipts 
showing  the  payment  of  the  taxes,  then  the  whole  principal  shall  be- 
come due  at  the  mortgagee's  option,  and  without  notice.     It  will  be 
observed  that  the  only  one  of  these  agreements  which  the  note  contains 
in  terms  is  the  agreement  that  the  principal  shall  become  due  without 
notice,  at  the  option  of  the  mortgagee,  upon  failure  to  pay  interest 
or  comply  with  any  of  the  other  conditions  of  the  mortgage ;    but  the 
argument  is,  in  effect,  that  all  of  the  collateral  agreements  in  the  mort- 
gage have  become  a  part  of  the  note  by  virtue  of  the  legal  principle 
just  stated.     This  is  a  decidedly  revolutionary  proposition.     If  it  be 
true,  both  the  business  world  and  the  courts  have  been  sadly  in  error 
for  many  years.    This  court  held  at  an  early  day  that  a  note  negotiable 
on  its  face  retained  its  negotiable  character  notwithstanding  it  was  se- 
cured by  a  mortgage  upon  real  estate,  and,  when  transferred  before 
due,  carried  the  mortgage  with  it  relieved  of  all  equities  (Croft  v. 
Bunster,  9  Wis.  503) ;  and  that  the  words  "secured  by  real  estate  mort- 
gage" upon  the  face  of  the  note  were  not  sufficient  to  charge  the  as- 
signee with  notice  of  any  defense,  nor  of  the  terms  of  mortgage  (Kelley 
V.  Whitney,  45  Wis.  110,  30  Am.  Rep.  697;    Boyle  v.  Lybrand,  113 
Wis.  79,  88  N.  W.  904).    If  all  the  agreements  contained  in  every  mort- 
gage are,  as  matter  of  law,  imported  into  the  note,  these  propositions 
could  not  be  true,  for  the  general  rule  (except  as  changed  by  statute)  is 
that  negotiable  instruments  cannot  be  bound  up  and  fettered  with  col- 
lateral agreements  for  the  doing  of  other  things  besides  the  payment 
of  money,  and  retain  their  negotiable  character. 

Upon  the  principle  contended  for,  the  most  simple  real  estate  mort- 
gage would  deprive  the  note  which  it  secures  of  its  negotiable  charac- 
ter, because  it  would  import  into  the  note  one  or  more  collateral  agree- 
ments, which  are  not  for  the  payment  of  money.  Fortunately  it  is  not 
necessary  to  give  so  violent  a  shock  to  the  well-understood  principles  of 
law  governing  the  negotiability  of  notes  and  mortgages.  The  appel- 
lants' contention  really  results  from  a  confusion  of  ideas.  They  lay 
down  the  well-understood  proposition  that  contemporaneous  instru- 


CERTAINTY  AS  TO  THE  TERMS  OF  THE  ORDER  OR  PROMISE     39 

ments  relating  to  the  same  subject-matter  are  to  be  construed  together, 
and  conclude  that  it  follows  that  a  note  and  mortgage,  though  sep- 
arately executed,  are  one  instrument,  and  that  the  note  is  that  instru- 
ment. The  rule  that  instruments  are  to  b'e  construed  together  does  not 
lead  to  this  result.  Construing  together  simply  means  that,  if  there  be 
any  provisions  in  one  instrument  limiting,  explaining,  or  otherwise 
affecting  the  provisions  of  another,  they  will  be  given  effect  as  between 
the  parties  themselves  and  all  persons  charged  with  notice,  so  that  the 
intent  of  the  parties  may  be  carried  out,  and  that  the  whole  agreement 
actually  made  may  be  effectuated.  This  does  not  mean  that  the  pro- 
visions of  one  instrument  are  imported  bodily  into  another,  contrary  to 
the  intent  of  the  parties.  They  may  be  intended  to  be  separate  instru- 
ments, and  to  provide  for  entirely  different  things,  as  in  the  very  case 
before  us.  The  note  is  given  as  evidence  of  the  debt  and  to  fix  the 
terms  and  time  of  payment.  It  is  usually  complete  in  itself — a  single, 
absolute  obligation.  The  purpose  of  the  mortgage  is  simply  to  pledge 
certain  property  as  security  for  the  payment  of  the  note.  The  agree- 
ments which  it  contains  ordinarily  have  no  bearing  on  the  absolute 
engagements  of  the  note,  but  simply  relate  to  the  preservation  of  the 
security  given  by  its  terms ;  such  as  the  payment  of  taxes,  the  insur- 
ance of  houses,  and  the  like. 

Wliile  the  two  instruments  will  be  construed  together  whenever  the 
question  as  to  The  nature  of  the  actual  transaction  becomes  material, 
this  does  noFniean  that  the  mortgage  becomes  incorporated  into  the 
note,  nor  that  the  collateral  agreements  to  pay  the  taxes,  or  to  insure 
the  property,  or  that  the  mortgagee  might  insure  in  case  of  default  by 
the  mortgagor  and  have  an  additional  lien  therefor,  become  parts  of 
the  note.  These  agreernents  pertain  to  another  subject,  namely,  the 
preservation  intact  of  the  mortgaged  property.  The  promise  to  pay 
is  one  distinct  agreement,  and,  if  couched  in  proper  terms,  is  negotiable. 
The  pledge  of  real  estate  to  secure  that  promise  is  another  distinct 
agreement,  which  ordinarily  is  not  intended  to  affect  in  the  least  the 
promise  to  pay,  but  only  to  give  a  remedy  for  failure  to  carry  out  the 
promise  to  pay.  The  holder  of  the  note  may  discard  the  mortgage  en- 
tirely, and  sue  and  recover  on  his  note ;  and  the  fact  that  a  mortgage 
had  been  given  with  the  note,  containing  all  manner  of  agreements  re- 
lating simply  to  the  preservation  of  the  security,  would  cut  no  figure. 
A  pleading  alleging  such  facts  would  be  stricken  out  as  frivolous  or 
irrelevant. 

This  idea  is  well  expressed  in  the  case  of  Garnett  v.  Myers,  65  Neb. 
280,  94  N.  W.  803,  where  it  is  said :  "If  the  terms  and  conditions  of  the 
mortgage  are  limited  to  the  proper  province  of  the  mortgage — that  is, 
to  provide  security  for  the  indebtedness — its  provisions  relating  solelv 
to  the  security  will  not  aft'ect  the  negotiability  of  the  note.  If  the 
holder  of  the  note  is  compelled  to  pay  the  taxes  or  insurance  on  the 
mortgaged  property  to  protect  the  security,  and  is  afterwards  allowed 


40  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

to  recover  the  amount  so  paid  in  addition  to  the  principal  indebtedness, 
this  does  not  aft'ect  the  amount  of  the  indebtedness  itself."  It  may  be 
added  to  this  that  provisions  to  that  effect  in  the  mortgage  do  not  affect 
at  all  the  absolute  character  of  the  promise  to  pay  contained  in  the  note, 
and  hence  do  not  affect  its  negotiability.  A  very  interesting  and  in- 
structive discussion  of  this  question  will  be  found  in  the  opinion  in  the 
case  of  Frost  v.  Fisher,  13  Colo.  App.  322,  58  Pac.  872,  where  the 
same  conclusion  is  reached. 

The  propositions  so  far  laid  down  seem  incontrovertible  if  the  prin- 
ciple is  to  be  maintained  that  a  note  negotiable  in  form  remains  nego- 
tiable notwithstanding  it  is  secured  by  an  ordinary  real-estate  mortgage. 
As  might  be  expected,  we  are  referred  to  no  authorities  which  really 
take  issue  with  that  principle,  or  squarely  hold  that  the  agreements  of 
every  mortgage  are  imported  into  the  accompanying  note.  The  nearest 
approach  to  such  a  holding,  perhaps,  is  the  case  of  Noell  v.  Gaines,  68 
]\Io.  649,  where  a  provision  in  a  deed  of  trust  as  to  the  time  of  payment 
of  the  debt  was  held  to  control  the  terms  of  the  note  in  the  hands 
of  a  purchaser  with  notice.  A  very  vigorous  and  persuasive  dissenting 
opinion  was  filed  in  this  case,  which  forms  instructive  reading  on  this 
very  question ;  but,  in  any  event,  the  case  does  not  reach  the  proposition 
that  agreements  in  a  mortgage,  simply  relating  to  the  preservation  of 
the  security,  are  ever  to  be  considered  as  imported  into  the  note.  Start- 
ing from  the  fundamental  proposition  that  the  ordinary  negotiable  note, 
accompanied  by  the  ordinary  real-estate  mortgage  with  the  ordinary 
covenants  to  pay  taxes,  etc.,  form  two  separate  contracts,  both  being  a 
part  of  the  same  transaction,  but  each  relating  to  its  own  subject-matter 
and  not  interfering  with  the  other,  just  as  a  building  contract  and  a 
bond  to  secure  its  performance  are  separate  and  distinct,  let  us  consider 
in  what  respect,  if  any,  the  note  and  mortgage  in  this  case  differ  from 
the  ordinary  note  and  mortgage. 

As  will  be  seen  by  reference  to  the  papers  themselves,  the  mortgage 
contains  conditions  requiring  the  payment  of  taxes  on  the  premises  by 
the  mortgagor;  the  exhibition  of  the  receipts  therefor  to  the  mort- 
gagee; the  maintenance  of  insurance  on  the  buijdings  in  approved  com- 
panies, with  the  right  to  the  mortgagee  to  insure  in  case  of  failure  of 
the  mortgagor,  the  expense  to  be  a  lien  on  the  premises  "added  to  the 
amount"  of  the  note;  also  a  provision  that  in  case  of  failure  to  pay 
interest,  taxes,  or  insurance,  or  to  exhibit  the  tax  receipts,  the  principal 
sum  shall,  at  the  option  of  the  mortgagee,  become  due  without  notice. 
Turning  to  the  note,  we  find  that  it  provides  that,  if  default  is  made  in 
payment  of  interest,  or  in  case  of  failure  to  comply  with  any  of  the 
conditions  or  agreements  of  the  mortgage,  then  the  principal  shall 
become  due,  at  the  option  of  the  mortgagee,  without  notice.  It  will  be 
noticed  at  once  that  none  of  the  collateral  agreements  of  the  mortgage 
are  in  terms  imported  into  the  note  except  the  agreement  that  the  prin- 
cipal shall  become  due,  at  the  mortgagee's  option,  in  case  of  failure  to 


CERTAINTY   AS   TO   THE  TERMS   OF  THE   ORDER  OR   PROMISE  41 

perform  any  of  the  agreements  of  the  mortgage.  It  will  be  noticed  also 
that  the  other  collateral  agreements  contained  in  the  mortgage  are 
simply  agreements  providing  for  the  due  preservation  of  the  mortgage 
security,  and  not  affecting  in  any  way  either  the  time  of  payment  or  the 
amount  of  the  note.  These  agreements  are  the  agreement  to  pay  the 
taxes  and  exhibit  the  receipts,  the  agreement  to  effect  and  maintain  in- 
surance on  the  buildings  for  the  mortgagee's  benefit,  and  the  agreement 
that  the  mortgagee  may  insure  in  case  of  default,  and  have  a  lien  on  the 
premises  "added"  to  the  note  for  the  premiums  paid.  There  was,  in- 
deed, a  claim  made  that  the  agreement  that  the  premiums  paid  should 
constitute  a  lien  added  to  the  note  meant  that  the  note  was  to  be  in- 
creased by  the  amount  paid,  so  that  the  amount  of  the  note  was  thereby 
rendered  uncertain ;  but  we  think  it  plain  that  the  clause  simply  pro- 
vides for  the  acquiring  of  a  lien  upon  the  premises  in  addition  to  the 
lien  of  the  note.  This  meaning  seems  so  obvious  to  us  that  we  will 
spend  no  more  time  upon  the  suggestion. 

These  last-named  collateral  agreements,  then,  being  simply  proper 
agreements  for  the  preservation  of  the  security,  and  not  intended  nor 
fitted  to  qualify  or  affect  in  any  way  the  absolute  promises  of  the  note, 
do  not,  upon  the  principles  hereinbefore  laid  down,  enter  into  or  change 
the  note  in  the  least,  nor  affect  its  negotiability.  Such  being  the  case. 
we  have  only  to  consider  the  question  whether  the  agreement  that  the 
whole  principal  of  the  note  shall  be  due  at  the  mortgagee's  option  in 
case  of  a  failure  to  pay  interest  or  perform  any  of  the  conditions  of  the 
mortgage  renders  the  note  nonnegotiable.  Upon  this  question  appellants 
place  reliance  upon  the  cases  of  Continental  Nat.  Bank  of  McGeoch, 
7Z  Wis.  332,  41  N.  W.  409,  and  W.  W.  Kimball  Co.  v.  Mellon,  80  Wis. 
133,  48N.W.  1100. 

In  the  first  of  these  cases,  an  agreement  inserted  in  the  note,  provid- 
ing that  the  payee  might  sell  collateral  securities  at  any  time  if  they 
declined  in  value,  and  apply  the  proceeds,  less  expense  of  sale,  on  the 
debt,  and  the  balance  should  forthwith  become  due,  was  held  to  make 
the  note  uncertain  as  to  amount  and  time  of  payment,  and  hence  non- 
negotiable.  In  the  Kimball  Case,  an  agreement  that,  in  case  of  failure 
to  pay  any  installment,  or  of  any  attempt  to  dispose  of  or  remove  the 
chattel  for  which  the  note  was  given,  the  holder  might  declare  the 
whole  amount  due,  and  collect  same  by  suit  or  sale  of  the  property,  and, 
if  there  was  a  deficiency  after  sale,  it  should  be  payable  on  demand,  was 
held  to  make  both  amount  and  time  of  payment  uncertain,  and  hence 
make  the  note  nonnegotiable.  It  must  be  admitted  that  both  of  these 
cases  have  a  strong  tendency  to  support  the  position  of  the  appellants 
upon  the  proposition  that  the  time  of  payment  is  rendered  uncertain  by 
the  agreement  before  us.  Especially  is  this  true  of  the  Kimball  Case. 
In  that  case  the  uncertainty  as  to  time  resulted  from  the  fact  that,  in 
case  the  giver  of  the  note  failed  to  pay  an  installment,  or  attempted  to 
dispose  of  or  remove  the  property  sold,  the  holder  might  at  once  collect 


42  BILLS   AND    NOTES   AND   THEIR   REQUISITES 

the  whole.  In  the  present  case  the  agreement  is  that  in  case  of  faikire 
to  pay  interest  or  keep  taxes  and  insurance  paid  the  holder  may  at  once 
collect  the  whole.  In  both  cases  the  contingency  depends  upon  the 
acts  or  omissions  of  the  maker  of  the  note. 

We  should  find  it  quite  hard,  if  not  impossible,  to  differentiate  the 
two  cases  were  it  not  for  the  provisions  of  the  negotiable  instruments 
law  (chapter  356,  p.  681,  Laws  1899),  which  was  passed  since  the  deci- 
sions cited,  and  prior  to  the  giving  of  the  note  in  question.  This  law 
gives  the  general  requirements  of  negotiable  paper  in  section  1675 — 1, 
p.  682,  among  which  are  the  following:  "(1)  It  must  be  in  writing 
signed  by  the  maker  or  drawer.  (2)  Must  contain  an  unconditional 
promise  or  order  to  pay  a  sum  certain  in  money.  (3)  Must  be  payable 
on  demand  or  at  a  fixed  or  determinable  future  time."  The  law  then 
provides,  in  section  1675 — 2,  p.  684,  that  the  sum  is  certain  within  the 
meaning  of  the  law  though  it  is  to  be  paid  "(3)  by  stated  installments, 
with  a  provision  that  upon  default  in  payment  of  any  installment  or  of 
mterest  the  whole  shall  become  due."  The  law  further  provides,  in 
section  1675 — 4,  p.  686,  that  an  instrument  is  payable  at  a  determinable 
future  time,  within  the  meaning  of  the  law,  which  is  payable  "(4)  at  a 
fixed  period  after  date  or  sight,  though  payable  before  then  on  a  con- 
tingency." These  two  provisions  seem  to  cover  this  whole  case,  and 
leave  really  nothing  to  discuss.  This  note  is  payable  at  a  fixed  period 
after  date,  but  may  be  made  payable  before  that  time  upon  the  happen- 
ing of  certain  contingencies  which  are  within  control  of  the  maker. 
The  latter  clause  quoted  would  seem  to  have  been  added  to  meet  just 
such  cases  as  the  present.  Such  agreements  as  we  have  here  are  of 
very  frequent  occurrence,  and  it  was  evidently  the  purpose  to  provide 
for  them. 

The  case  of  Wisconsin  Yearly  Meeting  of  Freewill  Baptists  v.  Bab- 
ler,  115  Wis.  289,  91  N.  W.  678,  is  also  somewhat  relied  on  by  appel- 
lants, but  it  evidently  has  no  bearing  on  the  case.  In  that  case  it  was 
held  that  a  clause  in  a  note  authorizing  the  confession  of  judgment  at 
any  time,  whether  due  or  not,  rendered  the  note  nonnegotiable,  because 
the  time  of  payment  depended  entirely  on  the  whim  or  caprice  of  the 
maker.  As  an  additional  reason  for  the  ruling,  the  fact  that  the  nego- 
tiable instruments  law  allows  the  insertion  of  a  clause  authorizing  a 
confession  of  judgment  if  not  paid  at  maturity  was  also  referred  to. 

While  we  have  considered  this  question  as  absolutely  settled  by  the 
negotiable  instruments  law,  it  must  not  be  supposed  that  we  have  failed 
to  examine  and  carefully  consider  the  numerous  cases  cited  by  the 
appellants,  mostly  from  Western  courts,  as  having  some  bearing  upon 
this  question.  We  have  been  unable  to  find  that  any  of  these  cases 
really  conflict  with  the  general  proposition  laid  down  in  the  beginning, 
namely,  the  proposition  that  the  ordinary  provisions  of  a  real  estate 
mortgage  requiring  payment  of  taxes  and  other  acts  by  the  mortgagor 
for  the  preservation  of  the  mortgaged  property  are  not  imported  into 


CERTAINTY   AS   TO   TOE   TERMS   OF   THE    ORDER   OR   PROMISE  4o 

the  accompanying  note  simply  because  the  papers  are  simultaneously 
executed  as  a  part  of  the  same  transaction.  A  number  of  them  are 
cases  decided  by  the  Kansas  Court  of  Appeals,  and  arc,  in  substance, 
to  the  effect  that,  where  a  bond  or  note  in  terms  refers  to  the  mortgage, 
and  declares  it  to  be  "a  part  of  this  contract,"  and  the  mortgage  con- 
tains covenants  to  pay  taxes,  insure,  keep  buildings  in  repair,  and  the 
like,  and  that  the  entire  sum  shall  become  due  in  case  of  default  in  any 
of  such  agreements,  this  renders  the  bond  or  note  nonnegotiable.  Such 
are  the  cases  of  Lockrow  v.  Cline,  4  Kan.  App.  716,  46  Pac.  720; 
Chapman  v.  Steiner,  5  Kan.  App.  326,  48  Pac.  607,  and  Wistrand  v. 
Parker,  7  Kan.  App.  562,  52  Pac.  59.  It  goes  without  saying  that  such 
cases  have  no  bearing  on  the  present  case,  because  here  there  is  no 
clause  in  the  note  making  the  mortgage  a  part  thereof,  or  adopting  its 
provisions,  except  the  provision  authorizing  the  whole  amount  to  be 
declared  due  upon  certain  contingencies. 

Another  line  of  cases,  from  Nebraska,  hold  that,  where  a  mortgage 
provides  that  the  mortgagor  shall  pay  the  taxes  levied  on  the  mortgagee 
for  or  on  account  of  the  mortgage,  this  agreement  destroys  the  nego- 
tiability of  the  note,  because  it  renders  the  amount  uncertain.  Garnett 
v.  Meyers,  65  Neb.  280,  91  N.  W.  400,  94  N.  W.  803 ;  Consterdine 
v.  Moore,  65  Neb.  291,  91  N.  W.  399,  96  N.  W.  1021,  101  Am.  St. 
Rep.  620 ;  Allen  v.  Dunn,  71  Neb.  831,  99  N.  W.  680.  Such  seems  also 
to  be  the  effect  of  the  case  of  Brooke  v.  Struthers,  110  Mich.  562,  68  N. 
W.  272,  35  L.  R.  A.  536.  Without  stopping  to  consider  whether  these 
decisions  should  be  approved  or  not,  it  is  enough  to  say  that  they  are 
not  at  all  in  conflict  with  the  present  decision.  The  agreement  to  pay 
taxes_was  to  pay  taxes  which  might  be  levied  on  the  mortgagee,  not  the 
taxes  on  the  mortgaged  property ;  hence  the  agreement  had  no  connec- 
tion vvith  the  preservation  of  the  security,  and  was  construed  by  the 
courts  as  an  agreement  to  pay  an  indefinite  sum  as  a  part  of  the  note. 

rnTlTFTll^s  of  Donaldson  v.  Grant,  15  Utah,  231,  49  Pac.  779,  and 
Gilbert  v.  Nelson,  5  Kan.  App.  528,  48  Pac.  207,  notes  containing  stip- 
ulations very  similar  to  those  found  in  the  present  case  are  pronounced 
nonnegotiable  upon  what  seems  to  us  very  unsatisfactory  reasoning, 
which  we  feel  no  inclination  to  follow,  especially  in  view  of  the  posi- 
tive provisions  of  our  negotiable  instruments  law  before  cited. 

The  cases  of  Dilley  v.  Van  Wie,  6  Wis.  209,  and  Elmore  v.  Hoft'man, 
Id.  68,  are  also  cited  as  sustaining  appellants'  contention,  but  it  is  evi- 
dent that  they  do  not.  In  the  Dilley  Case  the  note  contained  an  express 
clause  subjecting  it  to  the  provisions  of  another  agreement,  made  on 
the  same  day,  by  which  it  appeared  that  the  payment  was  subject  to 
certain  equities  between  the  parties.  The  clause  was  rightly  held  to 
deprive  the  paper  of  its  negotiable  character.  In  the  Elmore  Case  it 
was  held  that  a  collateral  agreement  made  between  the  parties  con- 
temporaneously with  a  note,  by  which  the  payee  agreed  to  give  day  of 
payment  on  the  note  till  the  happening  of  a  certain  named  contingency, 


I 


V-W% 


^U/V-  Ca^'-^'^   ^ 


44  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

was  admissible  in  evidence  to  defeat  an  action  on  the  note  in  the  hands 
of  one  who  purchased  the  note  with  notice  of  the  contemporaneous 
agreement.  We  hold,  therefore,  that  under  the  present  negotiable  in- 
struments law  the  note  in  the  present  case  is  negotiable,  and  in  so  hold- 
ing it  is  evident  that  the  cases  of  Continental  Nat.  Bank  v.  McGeoch^ 
'1-' >3  Wis.  332,  41  N.  W.  409,  and  W.  W.  Kimball  Co.  v.  Mellon,  80  Wis. 
133,  48  N.  W.  1100,  are  overruled  so  far,  at  least,  as  they  hold  that 

.-^  such  agreements  create  an  uncertainty  in  the  time  of  payment. 

The  next  contention  made  by  the  appellants  is  that  the  written  trans- 
fer of  the  note  was  not  a  commercial  indorsement,  but  a  mere  assign- 
ment, and  hence  that  the  transferee  took  it  subject  to  all  equities.  We 
■  think  this  contention  cannot  be  sustained.  The  addition  of  the  words 
"without  recourse"  does  not  impair  the  negotiable  character  of  the 
instrument.     Laws  1899,  p.  701,  c.  356,  §  1676—8.     While  there  is 

^  doubtless  some  authority  tending  to  support  appellants'  claim,  we  think 

that  there  can  be  no  doubt  that  the  transfer  in  the  present  case  must 
be  held  to  be  a  commercial  indorsement  under  the  decisions  of  this 
court  in  the  cases  of  Crosby  v.  Roub,  16  Wis.  616,  84  Am.  Dec.  720; 
Bange  v.  Flint,  25  Wis.  544 ;  Murphy  v.  Dunning,  30  Wis.  296.  In 
all  of  these  cases  a  negotiable  note  was  transferred  by  attaching  it  to 
a  negotiable  bond  which  recited  that  the  note  was  thereby  "assigned 
and  transferred"  to  the  holder  of  the  bond  as  security  for  the  payment 
of  the  bond,  there  being  no  indorsement  on  the  note  itself;  and  this 
was  held  an  indorsement  within  the  law  merchant.  Here  there  is  an 
agreement  on  the  back  of  the  note  itself,  signed  by  the  payee,  by  which 
he  sells,  assigns,  and  transfers  the  note  to  the  plaintiff.  The  intent  to 
pass  title  and  make  the  note  transferable  by  indorsement  and  delivery 
afterwards  seems  very  plain.  Such,  also,  seems  to  be  the  current  of 
authority.  1  Daniel,  Neg.  Inst.  (5th  Ed.)  §  688c.  *  *  * 
Judgment  affirmed. 


IV.  Payment  of  Money  Only  *' 


THOMPSON  V.  SLOAN  et  al. 
(Supreme  Court  of  New  York,  1840.     23  Wend.  71,  35  Am.  Dec.  546.) 

This  was  an  action  of  assumpsit  tried  at  the  Erie  circuit,  in  January, 
1839,  before  Hon.  Nathan  Dayton,  one  of  the  circuit  judges. 

The  suit  was  brought  on  a  note  made  and  dated  at  Buffalo,  in  this 
state  on  the  8~th' of  July,  1836,  for  $2,500,  payable  12  months  after 
date,  at  the  Commercial  Bank  in  Buffalo,  in  Canada  money.  The  note 
was  made  by  James  Sloan  and  John  Wilkeson,  payable  to  the  order  of 

12  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §J 
21-25. 


PAYMENT   OF   MONEY    ONLY  45 

Johnson,  Hodge  &  Co.,  which  firm  was  composed  of  E.  Johnson,  P. 
Hodge  and  M.  F.  Johnson,  by  the  latter  of  whom  the  note  was  indorsed 
in  the  name  of  the  firm.  The  suit  was  brought  against  the  makers  and 
indorsers  jointly.  The  declaration  contained  a  special  count  upon  the 
note,  and  also  the  common  money  counts.  After  proving  the  signatures 
of  the  defendants,  the  protest  of  the  note  and  notice  to  the  indorsers, 
the  plaintiff's  counsel  offered  to  read  the  note  in  evidence,  to  which  the 
defendant's  counsel  objected,  insisting  that,  being  payable  in  Canada 
money,  it  was  not  negotiable ;  that  Canada  money  meant  bills  of  the 
Canada  banks.  The  plaintiff  thereupon  offered  to  prove  that,  at  the 
time  of  the  making  of  the  note,  Sloan  and  Wilkeson,  the  makers  there- 
of, desired  to  have  it  drawn  payable  in  Canada  bank  bills,  but  that  he 
objected,  and  insisted  that  it  should  be  made  payable  in  Canada  money, 
which  testimony  was  objected  to,  and  rejected.  The  plaintiff"  thereupon, 
under  a  written  consent  of  the  defendants,  read  in  evidence  a  copy  of 
an  act  of  the  provincial  Parliament  of  Upper  Canada,  passed  20th  April, 
1836,  fixing  the  weight  and  rate  of  certain  gold  and  silver  coins,  and 
declaring  that  the  same  should  pass  current  and  be  deemed  a  legal  ten- 
der in  the  province,  in  payment  of  all  debts  and  demands ;  as  thus : 
"The  British  guinea,  weighing  five  pennyweights  nine  and  a  half  grains, 
Troy,  at  one  pound,  five  shillings  and  six  pence;  the  British  sovereign, 
weighing,  &c.,  at,  &c. ;  the  eagle  of  the  United  States  of  America, 
coined  before,  &c.,  weighing,  &c.,  at,  &c. ;  the  eagle  of,  &c.,  coined 
since,  &c.,  weighing,  &c.,  at,  &c. ;  the  British  crown  at  six  shillings ; 
the  Spanish  milled  dollar,  at,  &c. ;  the  dollar  of  the  United  States  of 
America  at,  &c. ;  the  Mexican  dollar  at,"  &c.,  and,  after  reading  the 
same,  rested.  The  counsel  for  the  defendant  then  offered  to  prove  the 
meaning  of  the  words  ''Canada  money,"  as  generally  understood  at 
Buffalo  by  persons  in  trade  there,  which  evidence  was  objected  to  by 
the  plaintiff's  counsel ;  but  the  objection  was  overruled  by  the  judge, 
and  the  defendants  thereupon  called  several  witnesses,  who  proved 
that  Canada  money  was  understood  at  Buffalo  to  mean  bills  of  the 
Canada  banksTTUpon  which  evidence  the  judge  ordered  a  nonsuit  to  be 
entered.    The  plaintiff  asks  for  a  new  trial. 

CowEN,  J.  A  promissory  note  must,  in  order  to  come  within  the 
statute,  Jike  a  bill  of  exchange^^Fe" payable  in  money  only,  in  current 
specie  (Bayl.  on  Bills,  10  [Am.  Ed.  of  1836]  ;  Ex  parte  Imeson,  2 
Rose,  225);  or  at  least  in  what  we  can  judicially  notice  as  equivalent 
to  money.  Accordingly  a  note  payable  in  bills  of  country  banks  (Jones 
v.  Fales,  4  Mass.  245),  in  Pennsylvania  or  New  York  paper  currency, 
current  in  Pennsylvania  or  New  York  (Leiber  v.  Goodrich,  5  Cow.  186), 
in  notes  of  the  chartered  banks  of  Pennsylvania,  though  the  note  was 
made  and  payable  in  the  state  of  Pennsylvania  (McCormick  v.  Trotter, 
10  Serg.  &  R.  [Pa.]  94;  see  Cook  v.  Satterlee,  6  Cow.  [N.  Y.]  108,  16 
Am.  Dec.  432),  in  paper  medium  (Lange  v.  Kohne,  1  McCord  [S.  C] 
115;   see  McClarin  v.  Nesbit,  2  Nott  &  McC.  [S.  C]  519),  or  in  cash 


46  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

or  Bank  of  England  notes  (Ex  parte  Imeson,  before  cited,  2  Buck,  1  S. 
P.),  has  been  held  without  the  statute. 

The  farthest  we  have  gone  is  to  say  that  a  note  drawn  and  payable 
here,  in  New  York  bills  or  specie  (Keith  v.  Jones,  9  Johns.  120),  or  in 
bank  notes  current  in  the  city  of  New  York  (Judah  v.  Harris,  19  Johns. 
144),  is  negotiable.  In  both  cases  the  court  went  on  the  ground  of  a 
right  to  take  judicial  notice  that  New  York  bills,  and  especially  bank 
notes  current  in  the  city  of  New  York,  were  customarily  considered 
and  treated  as  equivalent  to  specie.  And,  in  the  last  case,  they  said, 
though  the  defendant  might  have  a  right  to  pay  with  foreign  bills  cur- 
rent in  the  city  the  note  was  still  to  be  regarded  as  payable  in  current 
mone)rr" 

Admitting  that  the  note  in  question  imports  an  obligation  to  pay  in 
gold  and  silver,  current  in  Canada,  I  do  not  see,  on  what  principle  we 
can  pronounce  it  to  be  payable  in  money,  within  the  meaning  of  the 
rule.  It  is  not  pretended  that  coins  current  in  Canada  are,  therefore, 
so  in  this  state.  As  gold  and  silver  they  might  readily  be  received,  and 
so  might  the  coin  of  any  foreign  country,  Germany  or  Russia  for  in- 
stance ;  but  the  creditor  might,  and  in  many  cases  doubtless  would,  re- 
fuse to  receive  them,  because  ignorant  of  their  value.  In  law  they  are 
all  collateral  commodities,  like  ingots  or  diamonds,  which  though  they_ 
might  be  received  and  be  in  fact  equivalent  to  money,  are  yet  but  goods 
and  chattels.  A  note  payable  in  either  would,  therefore,  be  no  more 
negotiable  than  if  it  were  payable  in  cattle  or  other  specific  articles. 
The  fact  of  Canada  coins  being  current  here  is  not,  at  any  rate,  so 
notorious  that  we  can  judicially  notice  them  as  a  universally  customary 
medium  of  payment  in  this  state ;  and  if  not,  they  are  no  more  a  part 
of  our  currency  than  Pennsylvania  bank  bills.  Leiber  v.  Goodrich, 
before  cited.  No  do  I  perceive  in  the  case  any  proof,  or  offer  to  prove, 
that  such  coins  were  of  universal  currency. 

This  view  of  the  case  is  not  incompatible  with  a  bill  or  note  payable 
in  money  of  a  foreign  denomination,  or  any  other  denomination  being 
negotiable,  for  it  can  be  paid  in  our  own  coin  of  equivalent  value,  to 
which  it  is  always  reduced  by  a  recovery.  Chit,  on  Bills,  615,  616 
(Am.  Ed.  of  1839);  Deberry  v.  Darnell,  5  Yerg.  (Terin.)  451.  A  note 
payable  in  pounds,  shillings  and  pence  made  in  any  country  is  but  an- 
other mode  of  expressing  the  amount  in  dollars  and  cents,  and  is  so 
understood  judicially.  The  course,  therefore,  in  an  action  on  such 
an  instrument  is  to  aver  and  prove  the  value  of  the  sum  expressed,  in 
our  own  tenderable  coin.  It  is  payable  in  no  other  (vide  Bayl.  on  Bills, 
23  [Am.  Ed.  of  1836],  and  the  cases  there  cited) ;  whereas  on  the  note 
in  question,  Canada  money,  a  specific  article,  would  be  a  lawful  tender. 
Canada  coppers,  for  aught  I  see,  and,  under  our  own  decisions,  bank 
bills  commonly  current  in  Canada,  would  also  be  tenderable. 

Nor  is  it  necessary  to  deny  that,  had  this  note  been  made,  indorsed, 
and  payable  in  Canada,  it  would  have  been  negotiable.    It  would  then 


PAYMENT   OF   MONEY    ONLY  47 

on  its  face  have  been  payable  in  the  current  coin  of  the  country  where 
it  was  made.  The  objection  is  that  the  note  was  made,  indorsed,  and 
payable  here,  in  a  fofelgn  commodity,  which  the  payee  was  entitled  to 
demand  specifically,  and  to  reject  gold  and  silver  current  in  the  United 
Stal^  It  Ts~of  course  the  same  thing  under  the  extrinsic  evidence 
oti'ered  by  the  plaintiff,  and  received  by  the  judge.  The  Canadian  stat- 
ute merely  proved  what  coins  were  current  as  Canada  money,  which 
could  not  be  recognized  as  the  money  of  this  country.  In  the  light  of 
that  proof,  the  note  must  be  read  as  necessaxily  payable  in  Canada 
money,  current  by  law  in  that  province.  It  did  not  improve  the  case, 
without  following  it  with  some  statute  making  that  money,  as  such, 
current  here ;  or,  at  least,  showing  that  it  was,  in  fact,  so  notoriously 
current  among  us,  that  we  should  be  entitled  to  take  judicial  notice  of 
the  fact.  The  latter  is  the  utmost  that,  by  our  cases,  the  plaintilt  could 
claim ;  though  we  have  gone  farther  than  the  cases  decided  in  any  other 
state  or  country,  so  far  as  they  were  cited  on  the  argument,  or  have 
come  under  my  observation,  except  a  case  in  Tennessee.  Deberry  v. 
Darnell,  5  Yerg.  451.  The  instrument  was  payable  in  North  Carolina 
notes,  yet  held  negotiable.  In  AlcCormick  v.  Trotter,  I  fear  we  were 
somewhat  justly  criticised  for  the  high  ground  on  which  we  had  placed 
all  our  state  bills  in  Keith  v.  Jones.  At  any  rate,  Mr.  Justice  Duncan 
very  truly  reminded  us  that  New  York  state  bills  had  depreciated  in 
common  with  those  of  Pennsylvania.  A  remark  which  he  made  as  to 
the  note  in  that  case,  which  was  payable  in  Pennsylvania  bills,  would,  I 
apprehend,  be  nearly  applicable  to  our  own,  at  some  stages  of  our  cur- 
rency, viz.,  that  "it  was  payable  in  more  than  forty  kinds  of  paper  of 
different  value."     *     *     * 

The  motion  to  set  aside  the  nonsuit,  and  for  a  new  trial,  is  denied.^' 


HOGUEv.  WILLIAMSON. 

(Supreme  Court  of  Texas,  1893.     85  Tex.  553,  22  S.  W.  5S0,  20  L.  R.  A.  4S1,  34 

Am.  St.  Rep.  823.) 

Gaines,  J.  This  is  a  question  certified  to  us  for  determination  by 
the  Court  of  Civil  Appeals  for  the  Third  Supreme  Judicial  district. 
The  certificate  is  as  f ollow-s  : 

"The  plaintiff,  Hogue,  brought  suit  against  defendant,  Williamson, 
upon  a  written  obligation,  which  reads  as  follows:  'Saltillo,  January 
25,  1888.  On  or  before  May  1,  1888,  I  promise  to  pay  C.  C.  Hogue, 
or  order,  one  thousand  INIexican  silver  dollars.  Geo.  S.  Williamson. 
$1,000  Mex.'  The  petition  alleges  that  on  May  1,  1888,  IMexican  dollars 
were  each  worth  85  cents  in  'American  coin,'  and  plaintiff  asks  judg- 
ment for  $850.  He  states  in  his  petition  that  the  note  is  payable  in 
Mexican  silver  dollars.    The  defendant  filed  a  general  denial,  and  also 

13  Arguments  of  counsel  and  a  part  of  the  opinion  are  omitted. 


48  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

averred  in  his  answer  under  oath  that  the  note  sued  on  was  given  for 
money  which  the  plaintiff  had  won  from  defendant  in  a  game  with 
cards,  and  was  therefore  illegal,  and  void. 

"Upon  the  trial  in  the  court  below  the  plaintiff  put  in  evidence  the 
written  obligation  sued  on,  and  proved  that  on  May  1,  1888,  Mexican 
silver  dollars  were  worth  80  cents  each.  The  plaintiff  then  rested,  and 
the  defendant  introduced  no  testimony.  The  court  instructed  the  jury 
to  return  a  verdict  for  defendant,  which  was  done,  and  judgment  en- 
tered accordingly.  If  the  instrument  sued  on  was  a  promissory  note, 
this  is  error.    Newton  v.  Newton,  11  Tex.  511,  14  S.  W.  157. 

"With  this  explanation,  the  Court  of  Civil  Appeals  for  the  Third  Su- 
preme Judicial  District  certifies  and  submits  to  the  Supreme  Court  for 
decision  as  part  of  the  law  of  this  case,  as  a  new  or  novel  question,  the 
following  proposition :  'Was  the  burden  of  proof  on  the  plaintiff,  after 
the  introduction  of  the  instrument  sued  on,  to  show  nonperformance 
of  its  obligations  by  defendant?  In  other  words,  is  the  written  obliga- 
tion sued  on  a  promissory  note,  obligating  its  maker  to  pay  a  certain 
sum  of  money ;  or  is  it  an  ordinary  contract  for  the  delivery  of  a  cer- 
tain commodity;  and  must  the  plaintiff,  by  affirmative  testimony,  show 
a  breach  of  the  contract?'  " 

We  are  of  the  opinion  that  the  instrument  in  question  is  a  promissory 
note.  It  is  such  in  form  and  in  substance,  unless  the  fact  that  the  sum 
payable  is  expressed  in  Mexican  silver  dollars  should  make  a  difference. 
Speaking  of  the  sum  for  which  a  bill  of  exchange  must  be  drawn,  Mr. 
Chitty  says :  "It  may  be  the  money  of  any  country."  Chit,  on  Bills, 
160.  Judge  Story  says  :  "But,  provided  the  note  be  for  the  payment  of 
money  only,  it  is  wholly  immaterial  in  the  currency  or  money  of  wh^t 
country  it  may  be  payable.  It  may  be  payable  in  the  money  or  currency 
of  England,  or  France,  or  Spain,  or  Holland,  or  Italy,  or  of  any  other 
country.  It  may  be  payable  in  coins,  such  as  in  pounds  sterling,  livres, 
tomnosis,  francs,  florins,  etc.,  for  in  all  these  and  the  like  cases  the 
sum  of  money  to  be  paid  is  fixed  by  the  par  of  exchange,  or  the  known 
denomination  of  the  currency  with  reference  to  the  par."  Story  on 
Prom.  Notes,  §  17.  The  same  rule  is  distinctly  laid  down  in  1  Daniel 
on  Negotiable  Instruments,  §  58,  and  in  Ticdeman  on  Commercial 
Paper,  §  29b.  In  view  of  the  opinion  of  these  eminent  text-writers, 
it  is  remarkable  that  we  have  found  but  two  cases  in  which  the  question 
is  discussed  or  decided. 

In  Black  v.  Ward,  27  Mich.  191,  15  Am.  Rep.  162,  it  is  held  that  a 
note  made  in  Michigan,  payable  in  Canada  in  "Canada  currency,"  is 
payable  in  money,  and  is  therefore  negotiable.  But  in  Thompson  v. 
Sloan,  23  Wend.  (N.  Y.)  71,  35  Am.  Dec.  546,  a  note  made  in  New 
York,  and  payable  there  in  "Canada  currency,"  was  held  not  negotiable. 
The  court,  however,  say:  "This  view  of  the  case  is  not  incompatible 
with  a  bill  or  note  payable  in  money  of  a  foreign  denomination  or  any 
other  denomination  being  negotiable,  for  it  can  be  .paid  in  our  own  coin 


PAYMENT  OF   MONEY   ONLY 


40 


of  equivalent  value,  to  which  it  is  always  reduced  by  a  recovery.  A 
note  payable  in  pounds,  shillings,  and  pence,  made  in  any  country,  is 
but  another  mode  of  expressing  the  amount  in  dollars  and  cents,  and 
is  so  understood  judicially.  The  course,  therefore,  in  an  action  on  such 
instrument  is  to  aver  and  prove  the  value  of  the  sum  expressed  in  our 
own  tenderable  coin."  This  decision  was  made  in  1840,  and  it  is  to  be 
inferred  that  at  that  time  the  dollar  was  not  a  denomination  of  the  law- 
ful money  of  Canada.  We  also  infer  that  when  the  Michigan  case 
arose  this  had  been  changed,  and  the  denomination  of  Canada  money 
corresponded  with  that  of  the  United  States.  Upon  this  theory  it 
would  seem  that  the  cases  may  be  reconciled.  The  language  quoted 
from  the  opinion  in  Thompson  v.  Sloan,  supra,  indicates  clearly  that, 
if  the  money  named  in  the  note  had  been  a  denomination  of  Canada 
money,  the  ruling  would  have  been  different,  unless,  perchance,  the 
word  "currency"  would  have  affected  the  question.  The  note  we  have 
under  consideration  is  for  Mexican  silver  dollars — coins  recognized  by 
the  laws  of  the  Uiiited  States  as  money  of  the  republic  of  Mexico. 
Rev.  St.  U.  S.  §  3567  (U.  S.  Comp.  St.  1901,  p.  2376). 

We  conclude  that  the  note  sued  upon  in  this  case  was  a  negotiable 
promissory  note,  and  that  when  the  plaintiff  offered  it  in  evidence,  and 
proved  the  value  of  the  Mexican  dollar  at  the  time  of  its  maturity,  he 
had  made  a  prima  facie  case;  and  our  opinion  will  be  certified  accord- 
ingly. 


HATCH  V.  FIRST  NAT.  BANK. 

(Supreme  Judicial  Court  of  Maine.  1900.    94  Me.  34S,  47  Atl.  908,  80  Am.  St. 

Rep.  401.) 

On  exceptions  by  defendant.  Assumpsit  upon  a  certificate  of  deposit, 
issued  to  one  Olive  Hodge  by  the  defendant  bank,  and  claimed  by  the 
plaintiff  as  a  gift  by  indorsement  and  delivery  before  the  death  of  the 
donor.    The  case  appears  in  the  opinion. 

Savage,  J.^*  This  action  is  brought  by  the  plaintiff  as  indorsee  on 
a  certificate  of  deposit  of  the  following  tenor : 

"The  First  National  Bank,  Dexter,  Ua'me,  Jan.  6th,  1897.  Olive 
Hodge  has  deposited  in  this  bank  five  hundred  and  sixty  dollars,  pay- 
able in  current  funds  to  the  order  of  herself  on  return  of  this  certificate 
properly  indorsed.  Int.  at  3%  per  annum  if  on  deposit  6  mos.  No, 
2,236.  C.  M.  Sawyer,  Cashier." 

The  defendant  requested  the  presiding  justice  to  rule  that  the  action 
could  not  be  maintained  by  the  plaintiff",  as  indorsee,  for  the  reason 
that  the  certificate  of  uci  "-ii  in  (jiKsiion  was  not  a  negotiable  instru- 
ment. The  presiding  justice  declined  so  to  rule,  and  the  defendant  ex- 
cepted. 

1*  Tlie  statement  is  abridged. 
Moore  Cases  B.&  N. — 1 


50  BILLS  AND    NOTES  AND  THEIR   REQUISITES 

The  defendant  contends  that  the  instrument  is  nonnegotiable  for 
three  reasons  :  First,  because  it  was  written  payable  in  "current  fundsj^ 
secoridjy,  because  of  the  clause,  "Int.  at  3%  per  annum  if  on  deposit  6 
mos. ;"  and,  lastly,  because  of  the  condition  of  payment  expressed  in 
the  words,  "on  return  of  this  certificate  properly  indorsed." 

That  a  certificate  of  deposit,  as  such,  is  a  negotiable  instrument  is 
held  by  almost  unanimous  authority  (2  Daniel  on  Negotiable  Instru- 
ments, §  1702;  ]\Iiller  V.  Austen,  13  How.  218,  14  L.  Ed.  119),  and  is. 
not  here  denied  by  the  learned  counsel  for  the  defendant.  They  only 
contend  against  certain  features  in  the  certificate  before  us.  This  court, 
following  universal  authority,  has  recently  defined  a  negotiable  instru- 
ment to  be  one  which  runs  to  order  or  bearer,  is  payable  in  money,  for 
a  certain,  definite  sum,  on  demand,  at  sight,  or  in  a  certain  time,  or  upon 
the  happening  of  an  event  which  must  occur,  and  payable  absolutely 
and  not  upon  a  contingency.  Roads  v.  Webb,  91  Me.  406,  40  Atl.  128, 
64  Am.  St.  Rep.  246.  If  the  certificate  in  question  does  not  conform 
to  these  requirements,  it  must  be  held  to  be  nonnegotiable. 

The  first  objection  is  that  it  is  not  made  payable  in  "money" ;  that 
"current  funds,"  in  which  it  is  made  payable,  should  not  be  judicially 
interpreted  to  mean  "money."  We  do  not  think  this  contention  should 
prevail.  This  subject  has  been  discussed  exhaustively  by  many  courts, 
and  the  conclusions  they  have  reached  on  the  one  side  and  the  other  are 
not  in  harmony.  But  we  think  that  the  modern  and  better  doctrine  is 
that  the  term  "current  funds,"  when  used  in  commercial  transactions  as 
the  expression  of  the  medium  of  payment,  should  be  construed  to  mean 
current  money,  funds  which  are  current  by  law  as  money,  and  that, 
when  thus  construed,  a  certificate  of  deposit  payable  in  current  funds  is, 
in  this  respect,  negotiable.  It  is  well  known  that  certificates  of  deposit 
are  commonly  made  payable  in  "currency"  or  in  "current  funds,"  and 
we  believe  that  the  interpretation  we  have  given  is  in  accord  with  the 
universal  understanding  of  parties  giving  and  receiving  these  instru- 
ments ;  an  understanding  which  we  should  resort  to  as  an  aid  to  in- 
terpretation, unless  the  words  themselves  fairly  import  some  other 
meaning.  Some  courts  hold  that  evidence  may  be  received  to  show  the 
meaning  of  the  terms  "currency,"  "current  funds."  But,  in  the  absence 
of  evidence,  these  courts  come  to  opposite  conclusions.  For  instance, 
in  Iowa,  the  court  holds  that  notes  payable  in  currency  are  prima  facie 
nonnegotiable,  but  that  evidence  may  be  received  to  prove  that  the  word 
"currency"  describes  that  which  by  custom  or  law  is  money,  and  thus 
the  instruments  may  be  shown  to  be  commercial  paper.  Huse  v. 
Hamblin,  29  Iowa,  501,  4  Am.  Rep.  244.  On  the  other  hand,  in  Michi- 
gan it  was  held  that,  where  a  certificate  of  deposit  was  made  payable 
in  currency,  "prima  facie,  at  least,  that  must  be  held  to  mean  money 
current  by  law,  or  paper  equivalent  in  value  circulating  in  the  business 
community  at  par."    "Such,  we  think,"  said  the  court,  "is  the  general 


PAY.MKXT   OF    MONEY  ONLY  51 

signification,  the  fair  import,  and  the  ordinary  legal  effect  of  the  term." 
Phelps  V.  Town,  14  Mich.  374;  Phoenix  Ins.  Co.  v.  Alien,  11  Mich.  501, 
83  Am.  Dec.  756. 

Still  other  authorities  hold  that  the  terms  "currency"  or  "current 
funds,"  used  in  commercial  paper,  ex  vi  termini  mean  money.  Judge 
Campbell,  in  Black  v.  AVard,  27  Mich.  191,  15  Am  Rep.  162,  after  a 
critical  examination  of  a  mass  of  authorities,  declared  that,  with  few 
exceptions,  "the  general  course  of  authority  is  in  favor  of  the  negotia- 
bility of  paper  payable  in  currency,  or  in  current  funds ;  and  these  de- 
cisions rest  upon  the  ground  that  those  terms  mean  money,  as  the  ne- 
cessity of  having  negotiable  paper  payable  in  money  is  fully  recog- 
nized." 

"The  term  'funds,'  "  say  the  court  in  Galena  Ins.  Co.  v.  Kupfcr,  28 
111.  332,  81  Am.  Dec.  284,  "as  employed  in  commercial  transactions, 
usually  signifies  money.    Then  the  term  'current  funds'  means  current 
money,  par  funds,  or  money  circulating  without  any  discount."     Re- 
specting an  instrument  payable  in  "current  funds,"  the  Maryland  court 
said  :  "The  words  'current  funds,'  as  used  in  the  paper  before  us,  mean 
nothing  more  or  less  than  current  money,  and,  so  construed,  the  instru- 
ment was  negotiable."    Laird  v.  State,  61  Md.  311.    See,  also.  Miller  v. 
Race,  1  Burr.  452,  1  Smith,  Lead.  Cas.  808.     The  Supreme  Court  of 
the  United  States  had  occasion,  in  Bull  v.  Bank,  123  U.  S.  105,  8  Sup. 
Ct.  62,  31  L.  Ed.  97,  to  pass  upon  the  negotiability  of  an  instrument 
which  had  been  made  payable  in  "current  funds."     That  court  said: 
"Undoubtedly  it  is  the  law  that,  to  be  negotiable,  a  bill,  promissory  note, 
or  check  must  be  payable  in  money,  or  whatever  is  current  as  such  by 
the  law  of  the  country  where  the  instrument  is  drawn  or  payable. 
There  are  numerous  cases  where  a  designation  of  the  payment  of  such 
instruments  in  notes  of  particular  banks  or  associations,  or  in  paper  not 
current  as  money,  has  been  held  to  destroy  their  negotiability.     But 
within  a  few  years,  commencing  with  the  first  issue  in  this  country  of 
notes  declared  to  have  the  quality  of  legal  tender,  it  has  been  a  common 
practice  of  drawers  of  bills  of  exchange  or  checks,  or  makers  of  prom- 
issory notes,  to  indicate  whether  the  same  are  to  be  paid  in  gold  or 
silver  or  in  such  notes ;   and  the  term  'current  funds'  has  been  used  to 
designate  any  of  these,  all  being  current,  and  declared  by  positive  enact- 
ment to  be  legal  tender.     It  was  intended  to  cover  whatever  was  re- 
ceivable and  current  by  law  as  money,  whether  in  the  form  of  notes  or 
coin.    Thus  construed,  we  do  not  think  the  negotiability  of  the  paper  in 
question  was  impaired  by  the  insertion  of  those  words."    See  Chrysler 
V.  Renois,  43  N.  Y.  209;  Howe  v.  Hartness,  11  Ohio  St.  449,  78  Am. 
Dec.  312;    Citizens'  Nat.  Bank  v.  Brown,  45  Ohio  St.  39,  11  N.  E. 
799,  4  Am.  St.  Rep.  526;  Telford  v.  Patton,  144  111.  611,  33  N.  E.  1119. 
The  case  of  Klaubcr  v.  Biggerstafif,  47  Wis.  551,  3  N.  W.  357,  32  Am. 
Rep.  773,  holding  that  a  certificate  of  deposit  payable  in  currency  is  ne- 


52  BILLS  AND    NOTES   AND  THEIR  REQUISITES 

gotiable,  is  sometimes  cited  as  distinguishing  between  "currency"  and 
"current  funds,"  but  we  think  the  distinction  is  more  in  language  than 
in  meaning,  for  the  Wisconsin  court,  after  carefully  defining  the  term 
"currency,"  add:  "This  construction  of  the  term  'currency'  might  per- 
haps properly  be  extended  to  the  term  'current  funds.'  It  must  extend 
to  the  latter  term  whenever  it  is  used  in  the  legal  sense  of  money." 

Another  contention  of  the  defendant  is  that  the  certificate  of  deposit 
is  not  negotiable  because  it  is  not  payable  absolutely,  but  only  contin- 
gently, "on  return  of  this  certificate  properly  indorsed."  We  think  this 
is  not  such  a  contingency  as  affects  the  negotiability  of  the  certificate. 
The  language  expresses  no  more  than  the  law  implies  as  the  duty  of  the 
holder  in  the  absence  of  any  such  stipulation.  2  Daniel  on  Negotiable 
Instruments,  §  1707;   Smilie  v.  Stevens,  39  Vt.  315. 

Further,  it  is  contended  that  this  certificate  is  uncertain  as  to  amount 
by  reason  of  the  interest  clause,  and  therefore  is  not  negotiable.  No 
time  of  payment  is  mentioned  in  the  certificate.  It  is  accordingly  pay- 
able on  demand.  If  payment  be  demanded  at  any  time  within  six 
months,  the  amount  payable  is  certain ;  it  is  the  face  of  the  certificate. 
If  payment  be  not  demanded  until  after  six  months,  the  amount  payable 
is  equally  certain ;  it  is  the  face  of  the  certificate  and  interest  to  the  time_ 
of  payment.  In  this  respect,  the  certificate  is  like  a  note  payable  at  a 
time  certain  with  interest  at  a  specified  rate  from  the  date  of  the  note, 
or  from  maturity  if  it  is  not  paid  at  maturity.  Such  notes  are  held 
negotiable.  As  in  the  case  of  a  note  on  demand  or  on  time  the  time 
when  it  may  be  actually  paid  is  uncertain,  so  it  is  uncertain  when  this 
certificate  may  be  presented,  and  payment  demanded.  But  whenever 
that  may  be,  the  sum  to  become  absolutely  payable  upon  it  at  any  given 
time  is  ascertainable  upon  its  face,  and  that  is  sufficient.  Smith  v. 
Crane,  33  Minn.  144,  22  N.  W.  633,  53  Am.  Rep.  20;  Towne  v.  Rice, 
122  Mass.  67;  Hope  v.  Barker,  112  Mo.  338,  20  S.  W.  567,  34  Am.  St. 
Rep.  387 ;  Crump  v.  Berdan,  97  Mich.  293,  56  N.  W.  559,  Z7  Am.  St. 
Rep.  345 ;  1  Daniel  on  Negotiable  Instruments,  §  53.  This  disposes 
of  the  exceptions  relating  to  the  negotiability  of  the  certificate. 

At  the  trial  the  plaintiff  claimed  that  Olive  Hodge,  when  she  in- 
dorsed the  certificate,  gave  it  to  her  as  her  property,  and  this  the  de- 
fendant denied.  The  defendant  requested  the  presiding  justice  to  in- 
struct the  jury  that,  "if  it  was  a  mere  gift  made  by  Olive  Hodge 
to  the  plaintiff  in  manner  aforesaid,  it  would  not  authorize  her  (the 
plaintiff')  to  demand  payment  of  the  balance  remaining  unpaid  repre- 
sented by  the  certificate,  but  still  unpaid  after  her  (Olive  Hodge's) 
death,"  which  request  was  refused,  and  exception  was  taken. 

We  do  not  think,  upon  the  facts  stated,  that  this  exception  raises  any 
question  of  law.  The  bill  of  exceptions  does  not  state  what  was  the 
"manner  aforesaid"  in  which  the  gift  was  made.  It  merely  states  that 
it  was  "a  question  in  dispute  between  the  parties"  whether  there  was 
a  gift  or  not. 


PAYMENT  OF   MONEY   ONLY  53 

If  there  was  a  gift — which  was  a  question  of  fact,  of  course — the 
property  in  the  certificate  remained  in  the  plaintiff  both  before  and  after 
the  death  of  Ohve  Hodge. 

Exceptions  overruled. 


HODGES  V.  SHULER. 

(Court  of  Appeals  of  New  York,  1860.    22  N.  T.  114.) 

Appeal  from  the  Supreme  Court.  The  action  was  against  the  de- 
fendants as  indorsers  of  the  following  instrument  or  note: 

"Rutland  &  Burlington  Railroad  Company. 
"No.  253.  $1,000. 

"Boston,  April  1,  1850. 

"In  four  years  from  date,  for  value  received,  the  Rutland  and  Bur- 
lington Railroad  Company  promises  to  pay  in  Boston,  to  Messrs.  W.  S. 
&  D.  W.  Shuler,  or  order,  $1,000,  with  interest  thereon,  payable  semi- 
annually, as  per  interest  warrants  hereto  attached,  as  the  same  shall 
become  due;  or  upon  the  surrender  of  this  note,  together  with  the  in- 
terest warrants  not  due  to  the  treasurer,  at  any  time  until  six  months 
of  its  maturity,  he  shall  issue  to  the  holder  thereof  ten  shares  in  the 
capital  stock  in  said  company  in  exchange  therefor,  in  which  case  in- 
terest shall  be  paid  to  the  date  to  which  a  dividend  of  profits  shall  have 
been  previously  declared,  the  holder  not  being  entitled  to  both  interest 
and  accruing  profits  during  the  same  period. 

"T.  Follett,  President.  Sam.  Henshaw,  Treasurer." 

Judgment  for  plaintiff,  and  defendants  except.^  ° 

Wright,  J.  The  single  question  is,  whether  the  defendants  can  be 
held  as  indorsers.  It  is  insisted  that  they  cannot,  for  the  reasons:  (1) 
That  the  instrument  set  out  in  the  complaint,  is  neither  in  terms  nor 
legal  effect  a  negotiable  promissory  note,  but  a  mere  agreement;  the 
indorsement  in  blank  of  the  defendants,  operating,  if  at  all,  only  as  a 
mere  transfer,  and  not  as  an  engagement  to  fulfill  the  contract  of  the 
railroad  company  in  case  of  its  default ;  and  (2)  that  if  it  be  a  note, 
tlie  jiotice  of  its  dishonor  was  insufficient  to  charge  the  defendants  as 
indorsers. 

Whether  the  blank  indorsement  of  the  defendants  imports  any  bind- 
ing contract,  depends  on  the  law  of  Massachusetts ;  in  which  state  it 
is  to  be  assumed,  from  the  facts  in  the  case,  that  the  original  instrument 
and  indorsement  were  made.  But  the  law  of  Massachusetts  does  not 
differ  from  that  of  this  state  or  of  England  in  any  particular  material 
to  the  present  inquiry.  In  Massachusetts  there  has  been  apparently 
a  relaxation  of  the  common-law  rule  so  far  as  to  extend  the  remedy 
against  indorsers  to  notes  payable  absolutely  in  a  medium  other  than 

15  The  statement  is  abridged,  and  a  part  of  tlie  opinion  omitted. 


54  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

cash ;  but  in  all  other  respects  the  legal  rules  appHcable  to  negotiable 
paper  are  the  same  in  that  state  as  in  our  own. 

The  instrument  on  which  the  action  was  brought  has  all  the  essential 
qualities  of  a  negotiable  promissory  note.  It  is  for  the  unconditional 
payment  of  a  certain  sum  of  money,  at  a  specified  time,  to  the  payee'i. 
order.  It  is  not  an  agreement  in  the  alternative,  to  pay  Jn  rnoncy  or 
railroad  stock.  It" was  not  optronarwItlT"  the  makers  to  pay  in  rnonej^ 
or  stock,  and  thus  fulfill  their  promise  in  either  of  two  specified  ways ; 
in  such  case,  the  promise  would  have  been  in  the  alternative.  The  pos- 
sibility seems  to  have  been  contemplated  that  the  owner  of  the  note 
might,  before  its  maturity,  surrender  it  in  exchange  for  stock,  thus 
canceling  it  and  its  money  promise ;  but  that  promise  was  nevertheless 
absolute  and  unconditional,  and  was  as  lasting  as  the  note  itself.  In  no 
event  could  the  holder  require  money  and  stock.  It  was  only  upon  a 
surrender  of  the  note  that  he  was  to  receive  stock;  and  the  money 
payment  did  not  mature  until  six  months  after  the  holder's  right  to 
exchange  the  note  for  stock  had  expired.  We  are  of  the  opinion  that 
the  instrument  wants  none  of  the  essential  requisites  of  a  negotiable 
promissory  note.  It  was  an  absolute  and  unconditional  engagement  to 
pay  money  on  a  day  fixed ;  and  although  an  election  was  given  to  the 
promisees,  upon  a  surrender  of  the  instrument  six  months  before  its 
maturity,  to  exchange  it  for  stock,  this  did  not  alter  its  character,  or 
make  the  promise  in  the  alternative,  in  the  sense  in  which  that  word  is 
used  respecting  promises  to  pay.  The  engagement  of  the  railroad  com- 
pany was  to  pay  the  sum  of  $1,000  in  four  years  from  date,  and  its 
promise  could  only  be  fulfilled  by  the  payment  of  the  money,  at  the  day 
named.     *     *     * 

Judgment  affirmed. 


VALLEY  NAT.  BANK  OF  CHAMBERSBURG  v.  CROWELL 

et  al. 

(Sunreme  Court  of  Pennsylvania,  1892.     14S  Pa.  284,  23  Atl.  1068,  33  Am.  St. 

Rep.  824.) 

Actions  on  promissory  notes. 

The^de'fcnce  set  up  by  the  affidavit  was  that  there  was  no  technical 
liability  as  indorsers  on  the  part  of  defendants,  because  of  the  non- 
negotiability  of  the  notes  sued  on.  These  notes  contained,  in  addition 
to  the  ordinary  form  of  note,  the  clause  which  is  quoted  in  the  opinion 
of  the  Supreme  Court. 

The  court  below,  Sadler,  P.  J.,  of  the  Ninth  judicial  district,  spe- 
cially presiding,  made  the  rules  absolute  in  both  cases,  and  defendants 

appealed. 

Errors  assigned  were  making  the  rule  absolute  and  entering  judg- 
ment. 


PAYMENT  OF  MONEY   ONLY 


"7 


55 


Per  Curiam,  March  28,  1892 : 

The  only  question  in  this  case  was  whether  the  note  in  controversy 
was  negotiable.  It  is  in  the  usual  form  of  negotiable  paper,  but  it  is 
*cbntenclccl  that  its  negotiability  is  destroyed  by  reason  of  the  following 
provision  contained  therein  :  "Having  deposited  herewith  a  like  amount 
of  Crowell  Company  mortgage  bonds  as  collateral  security,  which  we 
authorize  the  holder  of  this  note,  upon  the  nonperformance  of  this 
promise  at  maturity,  to  sell  either  at  the  broker's  board,  or  at  public  or 
private  sale,  without  demanding  payment  of  this  note  or  the  debt  due 
thereon,  and  without  further  notice,  and  apply  proceeds,  or  as  much 
thereof  as  may  be  necessary,  to  the  payment  of  this  note  and  all  neces- 
sary charges,  holding  us  as  makers  and  indorsers  responsible  for  any 
deficiency." 

We  find  nothing  in  this  to  destroy  the  negotiability  of  the  note. 
While  it  has  been  truly  said  that  a  promissory  note  is  a  courier  without  _ 
luggage,  we  find  nothing  in  the  language  quoted  beyond  the  statement 
that  the  note  is  accompanied  wjth  certain  collateral.  The  mere  giving 
of  collateral  security  with  a  promissory  note  docs  not  destroy  its  nego- 
tiabilitv :  Arnold  v.  Rock  River  Valley  Union  R.  R.,  5  Duer  (N.  Y.) 
207 ;  fowne  v.  Rice,  122  Mass.  67.  In  Woods  v.  North,  84  Pa.  407, 
24  Am.  Rep.  201 ;  Johnston  v.  Speer,  92  Pa.  227,  37  Am.  Rep.  675,  the 
amounts  of  the  notes  were  held  to  be  uncertain.  In  Bank  v.  Piollet,  126 
Pa.  195,  17  Atl.  603,  4  L.  R.  A.  190,  12  Am.  St.  Rep.  860,  the  court 
refused  to  hold  the  indorscr  liable,  because  the  time  of  payment  was  not 
fixed,  and  in  Bank  v.  McCord,  139  Pa.  52,  21  Atl.  143,  11  L.  R.  A.  559, 
23  Am.  St.  Rep.  166,  the  payment  was  made  dependent  upon  certain 
conditions.  In  the  case  in  hand,  the  amount  of  the  note  is  not  uncer- 
tain, nor  Js  there  any  question  about  the  time  of  payment.  And  the 
payment  is  not  made  dependent  upon  any  condition  whatever.  The 
agreement,  that  if  the  collateral  proves  insufficient  for  the  payment  of 
the  note,  and  all  necessary  expenses  and  charges,  the  makers  will  be 
responsible  for  any  deficiency,  neither  increases  nor  decreases  the  re- 
sponsibility of  the  makers.  It  merely  requires  them  to  do  what  the 
law  would  compel  them  to  do  without  such  an  agreement. 

We  are  of  opinion  that  the  affidavit  of  defence  was  insufficient  and 
the  judgment  properly  entered. 
Judgment  affirmed. 


OSBORN  V.   HAWLEY. 
(Supreme  Court  of  Ohio,  1S50.     19  Ohio,  130.) 

This  is  a  writ  of  error  to  the  court  of  common  pleas  of  Lorain 
county.    The  facts  will  be  found  stated  in  the  opinion  of  the  court. 

Caldwell,  J.  The  action  in  the  court  below,  was  assumpsit.  The 
plaintiff  declared  as  indorsee  of  a  promissory  note  made  by  defend- 


56  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

ant  for  $85.00.  The  declaration  also  contained  the  common  counts. 
The  case  being-  at  issue,  the  plaintiff  offered  the  note  in  evidence, 
which  was  ruled  out  by  the  court,  and  the  plaintiff  nonsuited.  The 
refusal  by  the  court  to  permit  the  note  to  go  in  evidence,  is  as- 
signed for  error.  No  argument  is  presented  on  either  side,  and 
the  bill  of  exceptions  only  shows  that  the  court  decided  that  the 
note  was  not  proper  evidence  in  the  cause. 

On  examination  of  the  record,  we  do  not  see  any  objecJ;ion  to 
the  note  being  given  in  evidence,  and  we  think  the  court  erred  in 
ruling  it  out.  The  note  has  attached  to  it,  and  forming  a  part  of 
the  instrument  a  power  of  attorney  to  confess  a  judgment,  and  we 
presume  the  court  may  have  held  that  that  fact  would  prevent  its 
negotiability.  And  on  that  presumption,  we  would  merely  rernark 
that  the  power  of  attorney,  being  added  to  the  note,  does  not  iri^ 
any  way'  cliange  the  legal  character  of  the  note,  except  that  it 
gives  a  more  summary  proceeding  for  its  collection.  It  is  still  a 
promissory  note,  and  being  payable  to  order,  is  negotiable  by  in- 
dorsement. The  power  of  attorney  is  not  negotiable,  and  Avhen 
the  legal  title  to  the  note  is  transferred,  the  power  of  attorney  be- 
comes invalid,  and  no  power  whatever  can  be  exercised  under  it, 
for  the  benefit  of  the  indorsee ;  and  he  holds  the  note  as  if  no  such 
power  had  ever  been  attached  to  it. 

The  judgment  of  the  court  of  common  pleas  will  be  reversed  and 
the  cause  remanded  for  further  proceedings. 


WISCONSIN  YEARLY  MEETING  OF  FREEWILL 
BAPTISTS  V.  BABLER. 

(Supreme  Court  of  Wisconsin,  1902.     115  Wis.  289,  91  N.  W.  678.) 
This  case  is  reported  at  page  34,  supra. 


FIRST  NAT.   BANK  OF  MONTGOMERY  v.  SLAUGHTER 

et  al. 

(Supreme  Court  of  Alabama,  1893.     98  Ala.  602,  14  South.  545,  39  Am.  St. 

Rep.  88.) 

Action  by  the  First  National  Bank  of  Montgomery  against  N.  M. 
Slaughter  and  others  on  a  promissory  note.  Judgment  for  defend- 
ants.   Plaintiff  appeals.    Reversed. 

This  action  was  founded  upon  a  promissory  note,  of  which  the 
following  is  a  copy:  "$245.00.  Patsburg,  Ala.,  July  15th,  1889.  On 
or  before  the  1st  day  of  October,  1889,  for  value  received,  the  un- 
dersigned of  the  county  of  Crenshaw,  state  of  Ala.,  jointly  and 


PAYMENT   OF   MONEY   ONLY  57 

severally  promise  to  pay  to  the  order  of  Montgomery  Iron  Works 
two  hundred  and  forty-five  dollars,  payable  at  1st  National  Bank 
of  Montgomery,  with  interest  until  paid,  and  reasonable  attorney's 
fees,  if  collected  by  law;  and  we  hereby  waive  presentment  for 
payment,  and  notice  of  protest  for  nonpayment,  of  the  same,  and 
also  waive  all  homestead  and  exemption  laws  as  to  this  debt.  It 
is  also  further  understood  and  agreed  that  the  title  to  the  De  Loach 
wheel  and  Pratt  gin,  for  which  the  note  is  given  in  payment,  shall 
remain  in  said  Montgomery  Iron  Works  until  this  note,  and  all  in- 
terest thereon  accrued,  is  paid  in  full.  N.  M.  Slaughter.  J.  L. 
Slaughter.  D.  L.  Slaughter.  Post-office  address :  N.  M.  &  J.  L. 
Slaughter,  Patsburg,  Ala."  The  note  was  properly  indorsed  by  the 
secretary  and  treasurer  of  the  Montgomery  Iron  Works,  and  it  was 
shown  that  the  said  note  was  transferred  to  the  plaintiff  in  due 
course  of  trade,  before  maturity,  for  a  valuable  consideration. 

There  were  several  rulings  of  the  circuit  court  upon  the  evidence 
sought  to  be  introduced,  to  which  exceptions  were  reserved  by  the 
plaintiff.  These  rulings  of  the  lower  court  were  based  upon  the 
idea — and  the  court  so  held — that  the  note  sued  on  was  not  com- 
mercial paper,  and  that,  therefore,  certain  evidence  which  was 
sought  to  be  introduced,  going  to  show  a  failure  of  consideration  as 
to  said  note,  and  other  defenses  thereto,  was  properly  allowed. 
There  was  judgment  for  the  defendants,  and  plaintiff  appeals. 

Coleman,  J.     The  instrument  sued  on  possesses  all  the  requisites 
of  commercial  paper.    It  is  made  payable  absolutely  at  a  designated 
Bank,,  for  a  sum  certain,  and  aTa"definite  timeT    The  fact~that  it 
contains  a  provision  for  the  payment  of  attorney's  fees,  a  waiver  of 
exemptions,  or  the  retention  of  the  legal  title  to  the  property  for 
which  it  was  given  as  a  security  for  the  payment  of  the  debt,  does 
not  impede  its  circulation  or  impair  its  validity  as  negotiable  paper. 
Montgomery  v.  Crossthwait,  90  Ala.  553,  8  South.  498,  12  L.  R.  A. 
140,  24  Am.  St.  Rep.  832;   McGhee  v.  Bank,  93  Ala.  192,  9  South. 
734.    The  circuit  court  was  in  error  in  holding  that  the  paper,  the 
foundation  of  the  suit,  was  not  commercial  paper. 
^  There  are  other  exceptions  reserved,  a  consideration  of  which 
would  lead  to  a  reversal  of  the  case  on  other  grounds,  but  we  are 
of  opinion  that  all  such  questions  will  be  eliminated  from  the  case 
on  another  trial.    The  holder  of  .such  paper,  received  in  due  course 
of  trade^hefoxe  maturity,  for  a  valuable  consideration,  without  no- 
tice, is  not  affected  by  any  defense  or  equities  which  might  be  avail- 
able to  the  maker  against  the  payee;  and,  by  the  express  provision 
of  the  statute  of  this  state,  "paper'governed  by  the  commercial  law, 
negotiated  before  maturity,  is  not  subject  to  set-off  or  recoupment." 
Code  1886,  §  2684.     The  evidence  shows  that  plaintiff  became  the 
owner,  in  due  course  of  trade,  for  \;iluc,  before  maturity.    There  is 
no  p?6of  of  notice  to  the  plaintiff",  nor  of  facts  calculated  to  put 
him  upon  notice,  of  any  defense  to  the  note.     Under  such  circuni- 


58  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

Stances,  the  plaintiff  was  entitled  to  a  verdict.     Ross  v.  Drinkard, 
35  Ala.  441 ;  Johnson  v.  Bank,  88  Ala.  274,  275,  6  South.  909;  Bar- 
ton V.  Barton,  75  Ala.  400. 
Reversed  and  remanded. 


SMITH  V.  MYERS. 

(Supreme  Court  of  Illinois,  1904.     207  111.  126,  G9  N.  E.  S5S.) 

Action  by  Dwig^ht  L.  Smith  against  Johnston  Myers.  From  a 
judgment  of  the  Appellate  Court  (107  111.  App.  410)  affirming-  a 
judgment  for  defendant,  plaintiff  appeals.     Affirmed. 

Ricks,  J.^^  This  is  an  appeal  from  the  Appellate  Court  for  the  First 
District  affirming  a  judgment  of  the  circuit  court  of  Cook  county 
against  appellant  for  costs  in  a  suit  brought  by  appellant  against 
appellee  in  an  action  of  assumpsit.  The  action  was  upon  the  fol- 
lowing instrument  in  writing: 

"Waterbury,  Conn.,  Aug.  1,  1893.  One  year  after  date  I  promise 
to  pay  to  the  order  of  Norman  D.  Grannis  thirty-five  hundred  dol- 
lars at  the  Fourth  National  Bank.  Value  received,  with  interest 
at  six  per  cent,  per  annum  and  taxes.  Due  August  1,  1894.  W. 
C.  Myers." 

Indorsed  on  the  back  as  follows: 

"Feb.  8,  1894,  rec'd  $532.87  on  within  note. 

"Dec.  3,  1894,  rec'd  on  within  note  $49.23.  ' 

"Dwight  L.  Smith,  Aug.  3d,  1893. 

"Rev.  Johnston  Myers,  Cin.,  O.,  July  31,  1893. 

"N.  D.  Grannis." 

The  contention  of  appellant  is  that  the  instrument  sued  on  is  a 
promissory  note,  carrying  with  it  all  the  legal  effects  and  incidents 
of  such' writing,  while  the  appellee  contends  that  said  instrument 
is  only  an  ordinary  contract  for  the  payment  of  money,  and  not  a 
promissory  note,  because  of  the  addition  of  the  words  "and  taxes," 
following  the  provision  for  interest,  and  preceding  the  name  of  the 
maker. 

If  the  instrument  sued  on  is  a  promissory  note,  we  think  the  clear 
legal  inference  from  the  facts  shown  by  the  record  is  that  it  was 
delivered  at  Waterbury,  Conn. ;  and  the  rule  seems  to  be  that,  in 
an  action  upon  a  negotiable  instrument,  the  law  of  the  place  where 
the  same  is  delivered  and  negotiated  is  to  control  in  determining 
the  liability,  if  any,  thereon.  Gay  v.  Rainey,  89  111.  221,  31  Am. 
Rep.  76.  And  the  place  where  a  contract  is  made  depends,  not 
upon  the  place  where  it  is  actually  written,  but  on  the  place  where 
it  is  delivered,  as  consummating  a  bargain.    1  Daniel  on  Neg.  Inst. 

18  Part  of  the  opinion  is  omitted. 


PAYMENT   OF   MONEY    ONLY  59 

660.  Under  the  statute  of  Connecticut,  as  introduced  in  evidence, 
if  the  instrument  in  question  can  be  held  to  be  a  promissory  note, 
the  relation  between  appellant  and  appellee  to  the  same  was  that 
of  indorsers,  and  not  of  guarantors  (Spencer  v.  Allerton,  60  Conn. 
410,  22  Atl.  778,  13  L.  R.  A.  806).  as  the  statute  declares  that, 
whether  the  indorsement  be  before  or  after  the  indorsement  by  the 
payee,  it  shall  import  the  contract  of  an  ordinary  indorsement.  If 
the  instrument  is  not  a  promissory  note,  then  it  is  clear  that  appel- 
lee bore  no  such  relation  to  it  as  would  render  him  liable  under  the 
proof  disclosed  in  this  record. 

Upon  a  mere  contract  for  the  payment  of  money  or  the  perform- 
ance of  any  other  covenant,  where  the  instrument  is  not  such  as 
comes  within  the  definition  of  a  negotiable  instrument,  one  by 
merely  signing  his  name  upon  the  back  thereof  does  not  become 
either  a  guarantor  or  an  indorser,  within  the  law  merchant.  There 
are  many  instruments  that  may  be  transferred  by  assignment  of  the 
holder  or  payee,  and  which  are  sometimes  called  "negotiable  instru- 
ments," such  as  bills  of  lading,  warehouse  receipts,  and  other  as- 
signable contracts,  for  the  performance  of  the  terms  or  covenants  of 
which  one  may  become  a  guarantor;  but  the  cinilrnct  of  guaranty 
on  such  instrument  will  not  arise  by  the  mere  signing  of  the  naml; 
of ^persoiij  not  a  party  thereto,  on  the  back  thereof.  We  take  it 
the  only  possible  relatTorT  between  the  parties  here,  under  the  law, 
if  it  could  be  held  that  the  instrument  in  question  is  a  negotiable 
instrument,  would  be  that  of  indorsers ;  and  the  relation  of  in- 
dorsers, which  appellee  and  appellant  must  have  borne  to  the  in- 
strument in  question,  is,  in  a  technical  sense,  applicable  only  to  a 
relation  touching  negotiable  paper.  While  to  write  one's  name  on 
the  back  of  a  writing  is  literally  to  indorse  it,  in  its  technical  sense, 
and  in  the  sense  in  which  it  is  used  when  applied  to  negotiable  pa- 
per, it  means  writing  one's  name  thereon  with  intent  to  incur  the 
liability  of  a  party  who  warrants  payment  of  the  instrument,  pro- 
vided it  is  duly  presented  to  the  principal  at  maturity,  and  is  not 
paid  by  him,  and  such  fact  is  duly  notified  to  the  indorser.  1  Daniel 
on  Neg.  Inst.  667.  Such  w^as  the  rule  of  the  law  merchant,  which 
has  been  modified  to  some  extent  in  this  state,  where  such  instru- 
ments are  controlled  by  the  laws  of  this  state,  by  requiring  that 
suit  be  timely  brought,  or  that  it  be  shown  that  suit  would  be  un- 
availing. 

A  promissory  note,  as  defined  by  the  English  bills  of  exchange 
act  (section  83),  is  "an  unconditional  promise  in  writing  made  by 
one  person  to  another,  signed  by  the  maker,  engaging  to  pay  on 
demand,  or  at  a  fixed  or  determinable  future  time,  a  certain  sum 
in  money  to,  or  to  the  order  of,  a  specified  person  or  to  bearer"; 
or  as  usually  defined :  "An  unconditional  promise  in  writing  for 
the  payment  of  a  certain  sum  of  money  absolutely  and  in  all 
events."    4  Am.  &  Eng.  Ency.  of  Law  (2d  Ed.)  77 .    And  as  defined 


GO  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

by  Chltty:  "A  promise  or  agreement  in  writing  to  pay  a  specified 
sum  at  a  time  therein  limited,  or  on  demand,  or  at  sight,  to  a  per- 
son therein  named,  or  to  his  order,  or  to  the  bearer."  Chitty  on 
Bills,  516.  Many  definitions  are  given,  varying  only  in  that  in  some 
of  them  the  parties  to  such  instruments  are  specified  more  particu- 
larly, and  the  time  of  payment  is  stated  in  different  terms ;  but  all 
agree  that,  in  order  to  constitute  a  promissory  note,  the  instrument 
must  be  for  a  specified  sum  or  certain  sum  of  money,  Lowe  v. 
Bliss,  24  111.  168,  76  Am.  Dec.  742. 

If  effect  is  to  be  given  to  the  language  of  this  instrument,  and 
no  part  of  it  is  to  be  rejected,  then  it  is  quite  clear  that  by  the 
addition  of  the  words  "and  taxes" — which  must,  if  they  have  any 
meaning  at  all,  refer  to  the  taxes  upon  the  instrument  itself,  or  the 
money  loaned  and  represented  by  it — the  amount  of  which  is. not 
fixed  by  the  instrument,  nor  is  there  any  means  found  in  the  instru- 
ment by  whfch  the  amount  can  be  fixed,  and  resort  to  extrinsic  evi- 
dence being  necessary  to  fix  the  same,  it  necessarily  follows_that 
the  sum  to  be  paid  is  uncertain,  and  the  instrument  is  not  a  prQmr^ 
issory  note.  Lowe  v.  Bliss,  supra;  4  Am.  &  Eng.  Ency.  of  Law 
(2d  Ed.)  77  \  7  Cyc.  596;  Hill  v.  Todd,  29  111.  101;  Dorsey  v. 
Wolff,  142  111.  589,  32  N.  E.  495,  18  L.  R.  A.  428,  34  Am.  St.  Rep. 
99;  Agrey  v.  Fearnsides,  4  M.  &  W.  168;  Howell  v.  Todd,  Fed. 
Cas.  No.  6,783;  Farquhar  v.  Fidelity  Trust  &  Safe  Deposit  Co.,  13 
Phila.  (Pa.)  473,  Fed,  Cas.  No.  4,676;  Walker  v.  Thompson,  108 
Mich.  686,  66  N.  W.  584;  Carmody  v.  Crane,  110  Mich.  508,  68  N. 
W.  268;  Donaldson  v.  Grant,  15  Utah,  231,  49  Pac.  779;  Lockrow 
V.  Cline,  4  Kan.  App.  716,  46  Pac.  720;  Brooke  v.  Strothers,  110 
Mich.  562,  68  N.  W.  272,  35  L.  R.  A.  536;  Garnett  v.  Myers,  65 
Neb.  280,  91  N.  W.  400,  94  N.  W.  803. 

Appellant  contends,  however,  that  the  word  "taxes"  is  so  indef- 
inite and  so  uncertain,  when  read  in  connection  with  the  entire  in- 
strument, that  it  ought  to  be  rejected  as  surplusage,  and,  in  sup- 
port of  that  contention',  refers  to  Hoyt  v.  Jaffray,  29  111.  104;  Hill 
V.  Todd,  Id.  101 ;  and  Bilderback  v.  Burlingame,  27  111.  338.  We 
do  not  think  the  cases  cited  support  the  contention  of  appellant. 
Lowe  V.  Bliss,  supra,  was  an  action  by  the  payee  against  the  maker 
of  an  instrument  in  the  form  of  a  note  for  the  payment  of  a  cer- 
tain sum  of  money  at  the  bank  of  Kankakee,  111.,  "with  current  rate 
of  exchange  on  New  York."  In  that  case  special  counts  were  filed 
in  the  declaration  upon  the  note,  but  there  was  an  omission  to  state 
anything  in  regard  to  the  provision  for  the  New  York  exchange. 
Objection  was  made  to  the  instrument  being  admitted  in  evidence 
on  the  ground  that  there  was  a  variance  between  it  and  the  dec- 
laration, and  that  objection  was  overruled.  On  appeal  to  this 
court  the  judgment  of  the  lower  court  was  reversed,  and  it  was 
held  that  the  instrument  was  not  a  promissory  note,  because  of  the 
provision  as  to  current  exchange  on  New  York,  which  made  the 


PAYMENT   OF   MONEY   ONLY  61 

sum  to  be  paid  uncertain,  as  exchang-e  varied  from  time  to  time, 
and  in  different  banks  and  localities.  In  that  case  the  note  was  ex- 
ecuted and  delivered  in  New  York.  In  Hill  v.  Todd,  supra,  the 
note  was  delivered  in  Chicago,  111.,  and  payable  at  the  offiee  of 
the  payee  "in  this  city,"  and  was  for  a  certain  sum  of  money,  "with 
current  rate  of  exchang-e."  In  that  case  it  was  held  that,  as  the 
note  was  delivered  and  payable  in  Chicago,  there  could  be  no  ex- 
change when  paid  at  the  place  where  payment  was  provided  for, 
and  that  the  words  "with  current  rate  of  exchange"  could  be  re- 
jected as  surplusage.  Hoyt  v.  Jaffray,  supra,  was  upon  an  instru- 
ment in  the  form  of  a  note,  payable  at  Miller's  Bank,  Aurora,  111., 
"with  current  rate  of  exchange  on  New  York,"  and,  following  the 
case  of  Hill  v.  Todd,  supra,  the  provision  with  reference  to  ex- 
change was  held  to  be  surplusage,  and  the  instrument  a  promissory 
note.  In  Bilderback  v.  Burlingame,  supra,  the  action  was  upon  an 
instrument  reading:  "Due  W.  B.  Goddard,  $450.00;  to  be  paid  in 
lumber  when  called  for;  in  good  lumber  at  $1.25."  That  instru- 
ment was  held  to  be  a  promissory  note,  and  it  was  further  held 
that,  as  against  the  maker,  it  was  not  necessary  to  prove  the  considera- 
tion. 

By  the  statute  of  Connecticut,  if  the  instrument  in  question  had 
been  a  promissory  nofe^^and,  without  the  provision  to  pay  taxes, 
it  unquestionably  "would  have  "been — it  was  subject  to  taxation. 
Howell  V.  Todd, 'supra,  was  a  case  in  the  United  States  Circuit' 
Court  in  Connecticut  upon  a  note  very  similar  to  this,  and  the 
court  there  said  in  reference  to  the  same:  "The  second  ground  is 
that  the  amount  to  be  paid  is  uncertain,  for  it  provides  for  the  pay- 
ment not  only  of  interest,  which  is  certain,  but  also  of  taxes,  the 
amount  of  which  must  necessarily  be  uncertain  until  they  are 
assessed  or  imposed  according  to  law.  The  instrument  in  question 
quite  certainly  is  not  a  promissory  note." 

As  has  well  been  said  by  counsel  for  appellee,  from  reading  the 
instrument  it  is  quite  as  certain  what  subject  the  word  "taxes"  re- 
lates back  to,  as  the  word  "interest."  The  expression,  is  "with  in- 
terest at  six  per  cent,  per  annum  and  taxes."  There  is  a  period 
after  "Fourth  National  Bank,"  and  the  expression  following  is, 
"Value  received,  with  interest  at  six  per  cent,  per  annum,  and  tax- 
es." Of  course,  from  long  usage  and  common  knowledge  no  one 
would  hesitate  to  interpret  the  instrument  as  meaning  that  the 
interest  should  be  paid  upon  the  debt  described  in  the  note;  and 
we  sec  r."  reason  for  doubting  that  the  intention  of  the  parties 
^vas  to  r  t  that  the  maker  of  the  note  should  pay  the  taxes 

on_it,  in  addition  to  the  principal  debt  and  interest  thereon.  The 
provision  in  the  instrument  in  Agrey  v.  Fearnsides,  supra,  was  for 
a  certain  sum  of  money,  and  "all  fines  according  to  rule";  and 
it  was  insisted  there,  as  here,  that  the  words  in  quotation  marks 
should  be  rejected  as  insensible,  and  therefore  mere  surplusage. 


G2  BILLS  AND    NOTES   AND   THEIR   REQUISITES 

Park,  Baron,  delivering  the  opinion,  said :  "It  is  quite  possible  that 
they  have  a  meaning-,  and  may  import  that  certain  pecuniary  fines 
or  forfeitures  are  to  be  paid  by  the  defendants;  and,  if  so,  this  i? 
certainly  no  promissory  note,  within  the  statute,  but  is  a  specific 
agreement  to  do  certain  things,  the  consideration  for  doing  which 
not  being  stated,  the  declaration  is  clearly  bad." 

In  Farquhar  v.  Fidelity  Trust  &  Safe  Deposit  Co.,  supra,  the  in- 
strument provided  for  the  payment  of  $5,000,  "together  with  all 
taxes  and  charges  in  the  nature  thereof  that  may  be  levied  upon 
this  note,  or  upon  the  indenture  or  mortgage  accompanying  the 
same,  or  the  principal  or  interest  moneys  thereby  secured,  im- 
mediately upon  their  assessment."  Speaking  of  this  provision,  the 
court  said :  "Overlooking  the  clause  touching  attorney's  commis- 
sion, how  can  it  be  said  that  the  notes  are  either  unconditional  or 
certain  in  amount,  in  view  of  the  stipulation  for  the  payment  of 
taxes,  or  charges  in  the  nature  thereof,  assessed  upon  the  principal 
or  interest?  Liable  to  taxation  as  the  property  is  in  the  hands  of 
the  holders  (and  this  is  the  import  of  the  stipulation),  in  some 
places  they  would  probably  be  free  from  this  charge,  while  in  oth- 
ers they  may  be  subjected  to  indefinite  and  varying  rates  of  tax- 
ation so  that  the  amount  to  be  paid  by  the  maker,  either  before 
or  at  the  maturity  of  the  notes,  would  fluctuate  according  to  col- 
lateral circumstances,  and  be  dependent  upon  the  domicile  of  the 
holder.  And  of  these  contemplated  charges  or  additions  to  the 
nominal  consideration,  the  notes  themselves  indicate  no  standard 
of  measurement.  They  could  only  be  ascertained  by  reference  to 
extrinsic  circumstances,  and  thus  the  amount  to  be  paid  by  the 
snaker  is  left  indeterminate  and  subject  to  possible  contention. 
Instruments  whose  consideration  is  thus  fluctuating  and  indefinite, 
and  which  are  laden  with  such  embarrassments  to  their  circulation, 
could  not  perform  the  functions,  and  therefore  do  not  possess  the 
character,  of  negotiable  paper." 

And  so  in  the  case  at  bar  the  instrument  sued  on  provides  for  the 
payment  of  taxes.  Whether  the  taxes  shall  be  paid  annually  or 
semiannually,  whether  before  the  note  becomes  due  or  after,  or  at 
the  time  of  its  maturity,  is  uncertain.  By  the  law  merchant,  and  by 
the  statutes  of  the  states  in  aid  thereof,  negotiable  instruments"^ 
occupy  a  highly  useful  and  valuable  place  in  the  commerce  and 
business  of  our  people.  There  is  no  other  form  of  contract  known 
that  in  so  few  words  may  contain  so  many  well-understood  and 
thoroughly  established  legal  rights  and  liabilities.  Their  presence 
and  use  are  a  boon,  and  to  destroy  or  to  materially  impair  them 
would  be  a  business  calamity.  To  permit,  by  strange  and  unusual 
provisions,  matters  in  no  way  relating  to  or  afifecting  trade  or  com- 
merce to  be  incorporated  into  them,  unsettles  established  rules  qP 
construction,  and  makes  that  dangerous  and  uncertain  which  be- 
fore was  definite  and  well   understood.    We  are  unwilling  to  assent 


PAYMENT   OF   MONEY   ONLY  03 

to  the  contention  that  such  instruments  can  or  ought  to  be  con- 
trued  as  negotiable  instruments  or  promissory  notes. 
Under  these  views,  it  is  unnecessary  to  discuss  other  questions 
urged,  as  this  seems  decisive  of  the  case,  and  the  judgment  of  the 
Appellate  Court  will  be  affirmed.    Judgment  affirmed. 


THORP  V.  MINDEMANN. 

(Supreme  Court  of  Wisconsin,  1904.     123  Wis.  140.  101  N.  W.  417,  68  L.  R.  A. 

146,  107  Am.  St.  Rep.  1003.) 

This  case  is  reported  on  page  36,  supra. 


LOWE  V.  BUSS. 
(Supreme  Court  of  Illinois,  ISGO.     24  III.  168,  76  Am.  Dec.  742.) 

This  was  an  action  in  assumpsit.  Declaration  filed  December  4th. 
Counts:  (1)  On  a  promissory  note  of  plaintiff  in  error  (defendant  be- 
low), dated  July  28,  1858,  made  at  New  York,  promising  "to  pay  Geo. 
Bliss  &  Co."  (defendants  in  error),  "plaintiffs,  the  sum  of  two  hundred 
and  twenty-two  and  •'^/loo  dollars,  with  the  current  rate  of  exchange 
on  New  York,  for  value  received,  in  ninety  days  after  the  date  there- 
of," alleging  nonpayment.  (2)  The  common  counts  for  goods  sold, 
money  lent,  had  and  received,  and  an  account  stated. 

With  declaration,  copy  of  note  sued  on,  as  follows: 
"$222.47.  New  York,  July  28,  1858. 

"Ninety  days  after  date,  I,  the  subscriber,  of  Aroma,  county  of  Kan- 
kakee, state  of  Illinois,  promise  to  pay  to  the  order  of  George  Bliss  & 
Co.,  two  hundred  twenty-two  and  *'^/ioo  dollars,  at  the  Kankakee  Bank, 
Kankakee,  111.,  value  received,  with  current  rate  of  exchange  on  New 
York.  David  N.  Lowe." 

Defendant  pleaded  the  general  issue. 

The  issue  was  tried  by  the  court,  jury  waived,  and  finding  for  plain- 
tiffs below,  for  $227.28. 

Motion  for  new  trial  overruled,  and  judgment  for  verdict  and  costs, 
and  30  days  given  to  file  bill  of  exceptions.^'' 

Walker,  J.  *  *  *  The  question  is  then  presented  whether  this 
instrument_W-aa  admissible  under  the  common  counts  without  proving 
aj:onsideration.  Promissory  notes,  bills  of  exchange,  and  sealed  in- 
struments, all  import  a  consideration,  and  when  they  form  the  basis 
of  an  action,  a  consideration  need  neither  be  averred  nor  proved,  but 
it  is  not  so  with  other  instruments.  This  instrument  is  not  under 
seal,  nor  is  it  a  bill  of  exchange.     Was  it  a  promissory  note?    That 

17  The  statement  is  abridged,  and  a  part  of  the  opinion  omitted. 


64  BILLS  AND    NOTES   AND  THEIR  REQUISITES 

is  defined  to  be  "a  promise  or  agreement  in  writing  to  pay  a  specified 
sum,  at  a  time  therein  limited,  or  on  demand,  or  at  sight,  to  a  person 
therein  named,  or  to  his  order,  or  to  the  bearer."  Chit,  on  Bills,  SYST 
Bayley  on  Bills,  p.  1,  defines  a  promissory  note  to  be  a  written  promise 
to  pay  money  absolutely  and  at  all  events.  And  in  the  application  of 
the  rule  the  doctrine  seems  to  be  adhered  to  with  entire  unanimity,  that 
a  note  or  bill  must  be  for  a  specific  sum,  or  at  least  for  a  sum  that 
may  be  ascertained  by  computation,  independent  of  all  extrinsic  evi- 
dence. If  an  instrument  be  for  a  specified  sum  of  money,  and  also  for 
the  payment  of  something  else,  the  value  of  which  is  not  ascertained, 
but  depends  upon  extrinsic  evidence,  it  would  not  be  a  bill  or  note. 
Had  this  promise  been  for  the  sum  of  money  named,  and  for  the  value 
of  four  days'  labor,  no  one  would  have  supposed  it  to  be  a  promissory 
note,  because  proof  would  have  to  be  resorted  to  for  the  purpose  of 
ascertaining  the  value  of  the  labor,  and  consequently  it  would  not  be 
for  a  specified  sum  of  money.  Such  a  promise  leaves  the  sum  agreed  to 
be  paid  wholly  uncertain.  We  know  that  the  current  rate  of  exchange 
between-commercial  points  is  fluctuating,  and  subject  to  constant 
change^  deepnding  upon  the  balance  of  trade  and  other  causes  incident 
thereto.  It  is  as  stfbject  to  fluctuation  as  the  value  of  labor  or  the 
price  of  grain,  cattle,  or  other  articles  of  property.  And  it  has  never 
been  held  that  a  court  may  judicially  fix  the  price  of  any  of  those  com- 
modities independent  of  proof,  and  yet  to  do  so,  would  be  no  more 
unreasonable  than  to  take  judicial  notice  of  the  rate  of  exchange  be- 
tween different  commercial  places.  We  are  aware  of  no  decision  that 
has.  ever  held  that  a  court  may  take  notice  of  such  facts,  nor  has  any 
decision  been  referred  to  which  holds  such  an  instrument  to  be  a  prom- 
,  issory  note.  Nor  can  it  be  successfully  urged  that  custom  has  changed 
the  law  and  rendered  such  instruments  valid  promissory  notes.  These 
instruments  owe  their  negotiability  and  evidence  of  the  receipt  of  a 
consideration  to  the  operation  of  the  statute,  and  not  to  the  common 
law.  Prior  to  the  adoption  of  the  statute  of  Anne,  in  Great  Britain, 
and  our  statute  regulating  negotiable  instruments,  they,  neither  in  that 
country  nor  in  this  state,  possessed  such  qualities.  And  under  the 
British  statute  they  must  be  for  the  payment  of  a  certain  specified 
sum  of  money,  and  so  under  our  statute,  and  not  mere  mutual  agree- 
ments or  covenants  to  have  that  effect. 

Unless  the  instrument  declared  upon  possesses  all  the  qualities  of 
a  bill  or  note,  or  be  under  seal,  if  declared  upon  specially,  a  considera- 
tion must  be  averred  and  proved,  or  if  offered  under  the  common 
counts,  it  must  be  proved,  to  authorize  a  recovery.  This  instrument 
being  a  simple  contract  not  under  seal,  and  neither  a  note  or  bill,  ls~- 
subject  to  all  the  rules  which  are  applied  to  other  simple  contracls. 
When  it  was  offered  under  the  common  counts,  as  it  imports  no  con- 
sideration, to  authorize  a  recovery,  a  sufficient  consideration  should 
have  been  proved.     When  offered  under  the  common  counts,  it  dis- 


PAYMENT   OF   MONEY   ONLY  C5 

penscd  with  no  proof  that  would  have  been  required  under  a  properly 
framed  special  count.     It,  unlike  a  note  or  lyll,  afforded  no  evidence 
of  eithei^rnoney  lent^  advanced,  or  had  and  received  to  the  use  of  the 
glaintiflf.     *     *     * 
Judgment  reversed. 


SMITH  v.  CRANE. 

(Supreme  Court  of  Minnesota,  1SS5.     r,P,  Minn.  144,  22  X.  W.  633,  53  Am. 

Rep.  20.) 

Plaintiff,  as  indorsee  for  value  and  before  maturity,  brought  this  ac- 
tion in  the  municipal  court  of  Mankato  upon  the  promissory  note  set 
out  in  the  opinion.  The  answer  denies  that  the  note  is  negotiable,  de- 
nies that  plaintiff  is  the  holder  and  owner  of  the  note,  denies  that 
it  was  transferred  before  maturity,  alleges  that  it  was  given,  with  two 
other  notes,  in  payment  for  a  harvester  and  binder  which  was  accom- 
panied with  a  written  warranty,  alleges  a  breach  of  the  warranty  and  a 
return  of  the  harvester  and  binder  in  accordance  with  the  provisions 
of  the  warranty,  and  asks  that  the  damages  for  the  breach  be  set  off 
against  the  note.     *     *     * 

The  court  also  charged,  against  plaintiff's  objection,  that  "the  in- 
strument oft'ered  in  evidence  (the  note  in  suit)  is  not  a  promissory  note, 
but  is  subject  to  all  equities  existing  between  the  defendant  and  D.  M. 
Osborne  &  Co.,  whether  it  was  assigned  before  or  after  maturi4:y." 
Defendant  had  a  verdict,  and  plaintiff  appeals  from  an  order  refusing  a 
new  trial. ^^ 

Berry,  J.  "$100.  Good  Thunder,  July  24,  1882.  For  value  re- 
ceived on  or  before  the  first  day  of  January,  1884,  I,  or  we,  or  either 
of  us,  promise  to  pay  to  the  order  of  D.  AI.  Osborne  &  Co.  the  sum 
of  one  hundred  dollars,  at  the  office  of  Gebhard  &  Moore,  in  Mankato, 
with  interest  at  ten  per  cent,  per  annum  from  date  until  paid ;  seven,  if 
paid  when_due.  W.  J.  B.  Crane."  A  negotiable  promissory  note 
mustlDe  certain  as  to  amount.  Jones  v.  Radatz,  27  Minn.  240,  6  N.  W. 
800.  It  is  so  certain  when  the  sum  to  become  absolutely  payable  upon 
it  at  any  given  time  is  ascertainable  upon  its  face.  1  Daniel,  Neg.  Inst. 
§  53  ;  Towne  v.  Rice,  122  Mass.  67  ;  Jones  v.  Radatz,  supra. 

The  defendant's  position  is  that  the  foregoing  instrument  is  rendered 
uncertain  as  to  amount  by  the  interest  clause,  and  therefore  is  not  a 
negotiable  promissory  note.  As  to  the  legal  eft'ect  of  such  a  clause  the 
autlioritles  disagree.  Some  hold  that  the  contract  reserves  the  higher 
ra_teofJnterest,  with  a  pro\'1srDn  for  its  abatement,  upon  a  condition 
to  be  performed,  and  that,  therefore,  the  difference  between  the  two 

18  The  statement  is  abridged,  and  a  part  of  the  opinion  omitted. 
MooBE  Cases  B.&  N. — 5 


GG  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

'  "V 

fates  is  not  a  penalty,  but  the  contract  is  to  be  enforced  according  to  its 
literal  terms.  The  cases  holding  this  view  rest  upon  Nicholls  v.  Alay- 
nard,  3  Atk.  519.  See  \\'almesley  v.  Booth,  Barn.  Ch.  478,  481 ;  Bona- 
fous  V.  Rybot,  3  Burr.  1370;  Waller  v.  Long,  6  Munf.  (Va.)  71.  Other 
authorities  hold  that  the  clause  is  the  same  in  effect  as  if  it  had  re- 
served the  lower  rate  of  interest,  with  a  provision  that  if  the  indebted- 
ness is  not  paid  at  matu'rity,  interest  shall  run  at  a  higher  rate.  Seton 
v.  Slade,  7  Ves.  265.  And  see  Stanhope  v.  INIanners,  2  Eden,  197; 
Brockway  v.  Clark,  6  Ohio,  45;  Longworth  v.  Askren,  15  Ohio  St. 
370;  Brown  v.  Barkham,  1  P.  Wms.  652.  If  this  be  the  true  construc- 
tion of  the  clause,  it  is  generally  agreed  that  the  difference  between  the 
two  rates  is  to  be  treated  as  a  penalty.  Talcott  v.  Marston,  3  Minn. 
339  (Gil.  238) ;   Newell  v.  Houlton,  22  Minn.  19 ;   and  cases  last  cited. 

In  our  opinion  the  view  taken  by  the  authorities  last  mentioned,  as 
to  the  legal  effect  of  the  interest  clause  under  consideration,  is  the  more 
sensible,  and  most  in  accordance  with  what  would  seem  to  be  the  real 
object  of  the  parties  to  the  contract.  What  the  payee  really  wants  is 
his  money  at  the  due  date  of  the  contract,  and  to  secure  this  he  holds 
an  increase  of  the  rate  of  interest  over  the  debtor's  head.  In  other 
words,  the  increase  is  a  penalty  for  the  debtor's  delinquency.  Treating 
the  increase  as  a  penalty,  it  follows,  under  the  decisions  of  the  court 
before  cited,  that  the  note  in  suit  will  in  law  draw  the  same  rate  of 
interest  before  as  after  maturity — that  is  to  say,  7  per  cent. — and  that, 
therefore  (whatever  might  be  the  case  if  the  interest  clause  were  upheld 
according  to  its  literal  terms),  the  sum  absolutely  payable  upon  the  in- 
strument at  any  given  time  is  thus  made  certain  as  the  principal,  and  7 
per  cent,  interest.     *     *     * 

Order  reversed,  and  new  trial  granted. 


V.  Specification  of  Parties 


19 


TAYLOR  V.  DOBBINS. 

(Court  of  King's  Bench,  1720.     1  Str.  399.) 

In  case  upon  a  promissory  note,  the  declaration  ran,  that  the  defend- 
ant made  a  note,  et  manu  sua  propria  scripsit.  Exception  was  taken, 
that  since  the  statute  he  should  have  said  that  the  defendant  signed 
the  note,  but  the  court  held  it  well  enough,  because  laid  to  be  wrote 

19  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§ 


SPECIFICATION    OF  PARTIES  ^"" 

with  his  own  hand,  and  there  needs  no  subscription  in  that  case,  for  it 
is  sufficient  his  name  is  in  any  part  of  it.  I,  J.  S.,  promise  to  pay  is  as 
good  as  I  promise  to  pay,  subscribed  J.  S. 


PETO  V.  REYNOLDS. 
(Court  of  Exchetiuer,  1S54.    9  Exch.  410.) 

Assumpsit.  The  first  count  charged  the  defendant  as  acceptor  of  a 
Ijill  of  exchange.  The  second  charged  him  as  a  maker  of  a  promissory 
note. 

PTeasTto  the  first  count,  that  the  defendant  did  not  accept  the  bill ; 
to  the  second  count,  that  the  defendant  did  not  make  the  note.  Issues 
thereon. 

At  the  trial,  before  Talfourd,  J.,  at  the  last  Bristol  assizes,  it  ap- 
peared that  the  defendant  was  a  rnerchant  at  Bristol  and  owner  of  a 
vessel  called  the  "Mary,"  w'hich,  in  April,  1852,  had  sailed  from  that 
port  to  the  coast  of  Africa  under  the  command  of  one  Righton.  The 
plaintiff  was  treasurer  of  a  foreign  missionary  society,  and  the  regis- 
tered owner  of  a  vessel  called  the  "Dove,"  which  had  been  sent  by  that 
society  to  the  coast  of  Africa.  Whilst  Righton  was  at  Cameroons  in 
Africa,  he  there  saw  the  Dove,  and  agreed  with  one  Saker,  an  agent  of 
the  missionary  society,  to  purchase  that  vessel  for  £300,  for  the  purpose 
of  loading  the  Mary.  He  paid  ilOO,  and,  in  respect  of  the  residue, 
Saker  drew  the  following  bill  in  sets  : 

"Cameroons,  September  3,  1852. 

"Exchange  for  i200. 

"At  sight  of  this  my  third  of  exchange,  the  first  and  second  of  the 
same  tenor  and  date  being  unpaid,  please  to  pay  to  S.  M.  Peto,  Esq.,  or 
order,  the  sum  of  two  hundred  pounds  sterling  for  value  received,  and 
place  the  same,  as  by  letter  of  advice  of  3d  September,  to  the  account 
of  Alfred  Righton." 

Across  the  face  of  the  bill  Righton  wrote  the  defendant's  acceptance, 
as  follows:  "Accepted.  Samuel  Reynolds,  Esq.,  Shorn  Lane,  Bed- 
minster,  Bristol." 

A  witness  for  the  plaintifif  stated  that,  in  January,  1853,  he  presented 
the  above  bill  to  the  defendant,  who  denied  the  authority  of  Righton 
to  accept  bills  in  his  name,  but  nevertheless  promised  to  pay  this  bill. 
It  was  not,  however,  clear  from  the  testimony  of  the  witness,  whether 
the  defendant  had  made  an  al)solute  promise  to  pay,  or  a  conditional 
promise  to  pay  at  a  future  period.  The  defendant,  who  was  called, 
denied  that  he  had  absolutely  promised  to  pay  the  bill. 

It  was  objected,  on  the  part  of  the  defendant,  that  there  could  be 
no  valid  acceptance  of  a  bill  which  was  not  addressed  to  any  one.    The  ^ 
learned  judge  told  the  jury  that,  if  they  believed  from  the  evidence  " 
that  the  defendant  made  an  absolute  and  uncondidonal  promisejo  pay 


68  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

the  bill,  that  would  amount  to  a  parol  acceptance  of  it.  The  jury  found 
a  verdict  for  the  plaintiff  on  the  first  count,  for  the  amount  of  the  bill 
and  interest,  and  for  the  defendant  on  the  second;  leave  being  reserved 
to  the  defendant  to  move  to  enter  a  nonsuit. 

A  rule  nisi  having  been  obtained  accordingly,^" 

Parke,  B.  I  think  that  there  ought  to  be  a  new  trial,  because  the 
evidence,  as  to  the  acceptance  of  the  bill,  is  unsatisfactory.  At  the 
next  trial,  the  parties  will  have  an  opportunity  of  putting  on  the  record 
the  question  whether  this  instrument  is  a  bill  of  exchange;  and  there- 
fore it  is  not  necessary  to  express  any  decided  opinion  on  the  point. 
I  cannot,  however,  help  observing  that,  with  the  exception  of  Regina 
V.  Hawkes,  there  is  no  case  in  which  it  has  ever  been  decided  that  an 
instrument  could  be  a  bill  of  exchange  where  there  was  not  a  drawer 
arid  a  drawee.  With  respect  to  that  case,  it  does  not  seem  to  me  en- 
titled to  the  same  weight  of  authority  as  a  decision  pronounced  in  the 
presence  of  the  public,  and  on  reasons  assigned  after  hearing  an  argu- 
ment in  public.  I  must  own  that,  but  for  that  case,  I  should  have  had 
no  doubt  that  the  law  merchant  required  that  every  bill  of  exchange 
should  have  a  drawer  and  a  drawee.  This  instrument,  though  in  the 
form  of  a  bill,  is  not  addressed  to  any  one,  for  I  think  it  impossible 
to  consider  the  acceptance  as  an  address ;  but  I  do  not  see  why  the 
instrument  may  not  be  treated  as  a  promissory  note,  because,  upon 
the  face  of  it,  there  is  a  promise  to  pay  the  amount  written  in  the  name 
of  Samuel  Reynolds.  Then,  if  the  authority  to  subscribe  his  name  has 
been  subsequently  ratified,  that  amounts  to  a  promise  by  him.  There- 
fore, if,  on  the  next  trial,  there  is  satisfactory  evidence  to  show  that 
the  defendant  absolutely  promised  to  pay  the  amount  mentioned  in  the 
instrument,  he  will  be  liable  as  upon  a  promissory  note. 

Martin,  B.  I  am  of  the  same  opinion.  The  verdict  is  unsatisfac- 
tory, and  therefore  there  ought  to  be  a  new  trial.  With  respect  to  the 
matter  of  law,  if  it  were  necessary  to  express  a  decided  opinion,  I 
should  concur  with  my  Brothers  Parkk  and  Alderson.  It  seems  to 
me  that  it  is  absolutely  essential  to  the  validity  of  a  bill  of  exchange, 
that  it  should  have  a  drawer  and  a  drawee;  and,  except  for  the  case 
of  Gray  v.  Milner,  I  should  have  doubted  whether  the  making  a  bill 
payable  at  a  particular  place  was  a  sufficient  address.  However,  as- 
suming that  in  this  case  the  defendant  made  an  absolute  promise  to 
pay,  why  may  not  this  instrument  be  treated  as  a  promissory  note?  A 
promissory  note  need  not  be  in  any  particular  words.  Here  there 
is  a  request  to  pay  a  sum  of  money ;  then  a  person  accepts  that  in  the 
name  of  Samuel  Reynolds,  which  acceptance  is  a  direct  engagement  to 
pay.  The  person  so  accepting  is  not  Samuel  Reynolds,  but  a  person- 
who  professes  to  do  it  with  Samuel  Reynolds'  authority.  Then,  if  one 
man  professes  to  make  a  contract  on  behalf  of  another,  and  that  other 

2  0  Arguments  of  counsel  are  omitted,  and  the  statement  is  abridged.  Pol- 
lock, C.  B.,  and  Alderson,  B.,  also  delivered  opinions. 


SPECIFICATION    OF    PARTIES  69 

adopts  it,  it  is  the  same  as  if  he  had  made  it  himself.     Therefore,  if 
there  was  evidence  of  an  absokite  undertaking  by  Samuel  Reynolds  to 
pay,  this  instrument  is  his  promissory  note. 
Rule  absolute. 


FAIRCHILD  V.  OGDENSBURGH,  C.  &  R.  R.  CO. 
(Court  of  Appeals  of  New  York,  1S57.     15  X.  Y.  337,  69  Ain.  Dec.  GOG.) 

Appeal  from  a  judgment  of  the  Supreme  Court.  The  complaint  set 
forth  that  the  defendant  was  a  corporation,  under  the  general  railroad 
act,  and  that  the  plaintiffs  were  partners  engaged  in  the  construction 
of  portions  of  the  defendant's  road,  "and  that  heretofore,  to  wit,  on  the 
10th  day  of  May,  1855,  the  said  defendant  was  indebted  to  said  plain- 
tiffs in  the  sum  of  $300,  for  work  done  by  said  plaintiffs  for  said  de- 
fendant on  section  number  eighteen  of  defendant's  railroad  and  the 
defendant,  by  its  president,  John  Stryker,  thereto  duly  authorized,  then 
and  there  drew  its  certain  draft  or  order  in  writing,  dated  on  the  day 
last  aforesaid,  and  addressed  to  Rowland  S.  Doty,  treasurer  of  said 
defendant,  directing  the  said  treasurer  to  pay  to  said  plaintiffs  under 
the  firm  name  of  Fairchild,  Hopkins  &  Walker  $300,  being  the  amount 
due  them  for  work  on  section  number  eighteen,  according  to  engineer's 
estimate  for  January,  1855,  thereunto  prefixed,  and  then  and  there 
delivered  the  said  draft  or  order  to  the  said  plaintiff's ;  and  the  said 
plaintiffs  say  that  the  said  draft  or  order  was  duly  presented  to  the  said 
Rowland  S.  Doty,  treasurer  as  aforesaid,  and  payment  thereof  duly 
demanded,  but  the  same  has  not  been  paid ;  and  the  defendant  is  justly 
indebted  to  the  plaintiffs  thereon,  in  the  sum  of  $63.53  and  interest, 
from  the  10th  day  of  May,  1855."  There  were  five  other  drafts  set 
forth  in  the  same  manner ;  and  the  complaint  concluded  by  a  demand 
for  judgment  for  the  aggregate  amount  alleged  to  be  due  on  them  all. 

The  answer  of  the  defendant  was  a  denial,  in  respect  to  each  of  the 
drafts,  that  they  had  been  presented  to  Air.  Doty,  the  treasurer,  and 
that  payment  had  been  demanded. 

The  plaintiffs  applied  for  judgment,  on  the  ground  of  the  frivolous- 
ness  of  the  answer,  and  such  judgment  was  given  in  their  favor.  On 
appeal  to  the  general  term,  this  judgment  was  affirmed,  and  the  defend- 
ant appealed  to  this  court. 

Demo,  C.  J.  The  complaint  contains  a  distinct  averment  of  an  in- 
debtedness by  the  defendant  to  the  plaintiff's,  for  work  and  labor  to  an 
amount  equal  to  the  sum  claimed. 

The  paper  whidi  it  is  alleged  was  given  for  this  indebtedness  was 
not^^a  bill  of  exchange.  The  idea  of  a  biTI,  under  the  law  merchant, 
supposes  the^cxistence  of  a  party  other  than  the  drawee,  to  whom  the 
bill  is  addressed,  and  who  is  therein  requested  to  pay  the  amount 
to  the  holder  on  account  of  the  drawer.  Here  the  party  with  whom 
the  plaintiffs  diij.li,  was  the  corporation  wdiich,  being  an  artificial  per- 


70  BILLS   AND    NOTES   AND   THEIR   REQUISITES 

son,  could  only  act  by  agents.  The  president  was  one  agent,  and  the 
treasurer  was  another,  and  as  a  convenient  method  of  keeping  the  ac- 
counts, the  former,  whose  duty  it  was  to  adjust  the  claims  for  labor, 
made  his  warrant  in  favor  of  the  plaintiffs  on  the  treasurer,  who  was 
entrusted  with  the  duty  of  keeping  the  money  and  paying  it  out  on 
proper  vouchers.  Both  the  drawee  of  the  order  and  the  party  to  whpm_^ 
it  was  addressed  represented  the  corporation ;  and  neither  incurred,  or 
were  expected  to  incur,  any  personal  obligation.  The  default  of  either 
in  performing  any  duty  respecting  the  order  would  be  the  default 
of  the  corporation,  and  would  not  subject  either  of  them  to  any  indi- 
vidual liability.  The  giving  of  the  order  for  the  debt  of  the  corpora- 
tion was  a  method  suggested  by  motives  of  convenience  for  transacting 
its  business,  and  keeping  its  accounts.  To  require  of  the  holder  of  such 
a  draft  the  kind  of  diligence  which  the  law  exacts  of  the  holder  of 
commercial  paper  would  be  a  perversion  of  its  object.  It  is  argued 
by  the  defendant's  counsel  that  the  plaintiffs  having  taken  a  draft  on 
the  defendant's  treasurer,  for  his  debt,  they  must  be  understood  to  have 
assented  to  their  forms  of  doing  business,  and  should  be  holden  to 
make  a  presentment  of  the  draft  before  suing  the  company.  It  would 
certainly  be  wrong  to  allow  the  creditor  in  such  a  case  to  subject  the 
company  to  costs,  when  the  funds  are  ready,  and  when  the  money 
would  be  paid  upon  the  presentation  of  the  paper.  But  the  answer  to 
the  argument  is  that  the  creditor  will  be  defeated  in  his  action,  as  to 
damages  and  costs,  if  the  company  is  able  to  show  that  its  treasurer 
was  furnished  with  funds,  and  would  have  paid  the  demand  if  he  had 
been  called  on.  It  becomes,  then,  a  question  as  to  the  onus  probandi. 
In  Wolcott  v.  Van  Santvoord,  17  Johns.  248,  it  was  settled,  upon  much 
consideration,  that  in  an  action  against  the  acceptor  of  a  bill,  or  the 
maker  of  a  note,  payable  at  a  particular  place,  it  is  not  necessary  for 
the  plaintiff  to  aver  or  prove  a  demand  of  payment  at  the  time  and 
place  appointed.  This  has  been  considered  the  unquestioned  law  ever 
since  the  judgment  in  that  case,  a  period  of  nearly  forty  years.  After 
such  an  acquiescence  in  a  principle  of  such  constant  application,  and 
which  relates  to  the  most  practical  of  subjects,  the  eft'ect  of  commercial 
paper,  we  cannot  listen  to  the  suggestion  of  the  defendant's  counsel, 
that  the  prior  cases  in  England  are  the  other  way.  If,  upon  examina- 
tion, we  found  them  to  be  so,  we  should  not  depart  from  the  rule  as 
we  find  it  settled  and  universally  acted  on  in  this  state. 

The  drafts  which  the  plaintiffs  received  for  their  debt  against  this 
corporation  are  in  the  nature  of  promissory  notes,  payable  at  the  office 
of  the  treasurer  of  the  company.  Though  in  the  form  of  bills,  they 
contain  an  acknowledgment  in  writing  of  their  indebtedness  to  the 
plaintiffs  in  the  amounts  mentioned  in  them,  and  an  undertaking  in 
effect  to  pay  these  amounts  at  the  treasurer's  office.  In  Miller  v. 
Thomson,  3  Manning  &  Gr.  576,  the  court  of  common  pleas,  in  Eng- 
land, determined  that  an  instrument  in  the  form  of  a  bill  of  exchange, 


SPECIFICATION   OF   PARTIES 


71 


drawn  upon  a  joint  stock  bank,  by  the  manager  of  one  of  its  branches, 
by  order  of  the  directors,  might  be  declared  upon  as  a  promissory  note. 
The  Chief  Justice  said  there  was  the  absence  of  the  circumstance  of 
there  being  two  distinct  parties  as  drawer  and  drawee,  which,  he  said, 
was  esseriHaT'to  the  constitution  of  a  bill  of  exchange.  That  being  so, 
he  added,  the  only  alternative  is  that  this  instrument  is  a  promissory 
note,  and  is  properly  declared  upon  as  such. 

We  adopt  the  principle  of  this  case,  which  is  strictly  applicable  to  the 
one  before  us.  The  issue,  therefore,  which  was  joined  upon  the  ques- 
tion whether  these  orders  had  been  presented  for  payment,  was  an 
immaterial  one,  and  the  Supreme  Court  was  right  in  its  judgment. 


FORWARD  V.  THOMPSON  et  al. 
(Court  of  Queen's  Bench,  Upper  Canada,  1S54.     12  U.  C.  Q.  B.  103.) 

Assumpsit  on  an  instrument  in  the  following  words: 
"£228.  7s.  6d.  Port  Hope,  December  8,  1853. 

"Three  months  after  date,  pay  to  the  order  of  William  Thomp- 
son,  at   Port   Hope,  the    sum  of  two   hundred   and   twenty-eight 
pounds,  seven  shillings,  and  six  pence,  currency,  for  value  received. 
"[Signed]  John  Thompson." 

This  was  declared  upon  as  a  promissory  note,  made  by  John 
Thompson  in  favor  of  the  defendant  William  Thompson,  who  was 
stated  to  have  indorsed  to  the  defendant  John  Thompson,  who  in- 
dorsed to  the  plaintififs. 

Pleas  denying  the  making  and  indorsing,  and  other  pleas  not  ma- 
terial to  mention. 

At  the  trial  at  Cobourg,  before  McLean,  J.,  it  was  objected  that 
the  instrument  produced  was  not  a  promissory  note.  Several  other 
objections  were  raised;  but  it  is  only  material  to  notice  the  one  on 
which  the  judgment  of  the  court  proceeded.-^ 
Draper,  J.,  delivered  the  judgment  of  the  court. 
The  first  question  to  be  decided  is  whether  the  mstrument  de- 
clared upon  in  point  of  law  amounts  to  a  promissory  note. 

The  authorities  cited  (to  which  may  be  added  Russell  v.  Powell. 
14  M.  &  W.  418,  and  Peto  v.  Reynolds,  18  Jur.  472)  establish  clear- 
ly, as  we  think,  that  it  could  not  have  been  treated  and  declared  up- 
on as  a  bill  of  exchange  for  want  of  a  drawee  ;  and.  if  not,  then  those 
cases  which  have  been  decided  on  the  ground  that  the  instrument 
in  question  is  made  in  terms  so  ambiguous  as  to  make  it  doubtful 
whether  it  be  a  bill  of  exchange  or  promissory  note,  have  no  ap- 
plication. Then  as  a  promissory  note  it  wants  the  very  essence  of 
a  promissory  noterthat  which  mainly  distinguishes  it  from  a  bill 
of  exchange,  viz.,  a  promise  in  terms  by  the  maker,  which  makes 

21  Arguments  of  counsel  are  omitted. 


72  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

him  primarily  liable  to  pay  the  money.  Here  are  the  proper  words 
used,  and  no  others,  for  drawing  a  bill  of  exchange,  and  if  there 
had  been  a  drawee  there  would  have  been  no  room  whatever  for 
treating  the  instrument  as  anything  but  a  bill  of  exchange.  But 
for  want  of  a  drawee  it  is  incomplete  as  a  bill  of  exchange;  and 
for  want  of  a  promise  it  appears  to  us  incomplete  as  a  note.  It  is 
quite  true  that  no  particular  words  are  indispensable,  but  that  any 
form  of  words  from  which  the  court  can  extract  an  expressed  in- 
tention to  promise  to  pay  are  sufficient;  but  in  this  case  we  see 
nothing  but  an  omission  to  complete,  by  adding  a  drawee's  name, 
what  in  all  other  respects  is  a  good  bill  of  exchange,  and  we  can- 
not find  either  reason  or  authority  for  holding  that  this  is  sufficient 
to  convert  it  into  a  promissory  note. 
Rule  absolute. 


ALMY  v.  WINSLOW. 

(Supreme  Judicial  Court  of  Massachusetts,  Bristol,  1879.     126  Mass.  342.) 

Contract  on  the  following  instrument,  declared  on  as  a  pr6mis- 
sory  note: 

"New  Bedford,  April  26,  1870. 

"On  demand,  with  interest  for  value  received,  please  pay  Charles 
Almy,  or  order,  fifty-five  and  ^Vioo  dollars. 

"George  F.  Winslow. 

"Witness:  Asa  C.  Smith." 

Writ  dated  March  28,  1877,  and  returnable  to  the  superior  court. 
The  defendant  demurred,  on  the  ground  that  the  declaration  set 
forth  no  legal  cause  of  action.  The  court  overruled  the  demurrer, 
and  the  defendant  alleged  exceptions. 

The  defendant  then  filed  an  answer,  admitting  the  execution  of 
the  paper  declared  on,  and  that  the  same  was  for  a  valid  considera- 
tion, and  alleging  that  the  cause  of  action  did  not  accrue  within 
six  years.  At  the  trial,  before  Gardner,  J.,  without  a  jury,  the 
judge  ruled  that  the  instrument  declared  on  was  a  witnessed  prom- 
issory note,  and  was  not  barred  by  the  statute  of  limitations,  and 
ordered  judgment  for  the  plaihtilif.  '  The  defendant  alleged  excep- 
tions.^^ 

SouLE,  J.  The  only  question  in  this  case  is  whether  the  instrument 
sued  on  is  or  is  not  a  witnessed  promissory  note.  That  it  is  wit- 
nessed is  admitted.  The  controversy  is  as  to  the  legal  effect  to  be 
given  to  its  terms.  It  does  not  purport  to  be  a  mere  acknowledg- 
ment of  the  existence  of  a  debt,  and  is  admitted  to  have  been  given 
for  a  valuable  consideration.  It  is  in  the  form  of  a  draft  or  bill 
of  exchange,  except  that  it  is  not  addressed  to  or  drawn  upon  any 
one,  and  therefore  lacks  one  essential  characteristic  of  a  bill.     It 

2  2  Part  of  the  opinion  is  omitted. 


SPECIFICATION   OF   PARTIES  73 

is  not  in  the  ordinary  form  of  a  promissoryjiote,  for  it  is  not  in 
express  terms  a  promise,  but  a  request  to  pay.  It  is  familiar  law, 
however,  that  no  particular  form  of  words  is  necessary  to  consti- 
tute a  promissory  note.  There  need  not  be  a  promise  in  express 
terms;  it  being  sufficient  if  an  undertaking  to  pay  is  implied  in 
the  contents  of  the  instrument.  Daggett  v.  Daggett,  124  Mass. 
149;  Franklin  v.  March,  6  N.  H.  364,  25  Am.  Dec.  462;  Carver  v. 
Hayes,  47  Me.  257;  Russell  v.  Whipple,  2  Cow.  (N.  Y.)  536; 
Brooks  V.  Elkins,  2  M.  &  W.  74. 

The  instrument  sued  on  was  intended  by  the  parties  to  take 
effect  as^acontract.^  The  language  imports  this;  and  no  other  in- 
ference can  be  drawn  from  the  fact  that  it  was  given  for  value.  It 
cannot  operate  as  a  draft,  check,  or  bill  of  exchange,  because  there 
is  no  drawee.  One  who  signed  an  acceptance  on  it  would  not  be 
liable  as  acceptor  of  a  bill.  Peto  v.  Reynolds,  9  Exch.  410.  To  be 
operative  at  all,  as  a  contract,  it  must  be  as  a  promissory  note.  It 
was  said  in  Edis  v.  Bury,  6  B.  &  C.  433,  by  Lord  Tenterden,  that, 
"where  a  party  issues  an  instrument  of  an  ambiguous  nature,  the 
law  ought  to  allow  the  holder,  at  his  option,  to  treat  it  either  as 
a  promissory  note  or  a  bill  of  exchange."  In  that  case  the  instru- 
ment was  in  the  form  of  a  promissory  note,  but  had  been  accepted 
by  a  person  whose  name  had  been  written  on  the  corner  of  the 
paper  at  which  the  name  of  the  drawee  of  a  bill  is  usually  placed. 
The  maker,  being  sued,  contended  that  he  was  discharged  for  want 
of  notice  of  dishonor  as  drawer  of  a  bill.  The  court  decided  other- 
wise. To  the  same  eft'ect  is  the  decision  in  Lloyd  v.  Oliver,  18  Q. 
B.  471.  It  has  been  repeatedly  held  that,  where  the  drawer  and 
drawee  of  an  instrument  in  the  form  of  a  bill  of  exchange  are  the 
same  person,  it  may  be  declared  on  as  a  promissory  note.  Miller 
V.  Thomson,  3  Man.  &  Gr.  576;  Allen  v.  Sea  Assur.  Co.,  9  C.  B. 
574;  Fairchild  v.  Ogdensburgh,  etc..  Railroad,  15  N.  Y.  237,  69  Am. 
Dec.  606.  The  reason  is  obvious.  The  drawer  of  a  bill  on  another 
assumes  only  a  conditional  liability.  His  contract  is  that  he  wnll 
pay  if  duly  notified  of  dishonor  of  the  draft ;  but  when  the  drawer 
is  the  drawee  too,  such  notice  would  be  an  empty  form,  and  his 
undertaking  is  not  conditional,  but  absolute.  The  doctrine  of  the 
cases  cited  above  on  this  point  is  recognized  and  approved  in  Com- 
monwealth v.  Butterick,  100  Mass.  12. 

In  view  of  the  foregoing  authorities,  there  seems  to  be  no  injus- 
tice in  holding  that  an  instrument  in  the  form  of  that  sued  on  is 
to  be  regarded,  in  passing  upon  the  rights  of  the  signer  and  the 
payee,  as  a  promissory  note.  The  signer,  having  made  the  instru- 
ment in  the  form  of  a  bill  of  exchange,  but  without  addressing  it 
to  any  one  as  drawee,  may  properly  be  held  to  have  intended  to 
assume  the  absolute  liability  to  pay,  which  he  would  have  assumed 
if  he  had  addressed  the  instrument  to  himself.  Any  other  view 
makes   the   instrument   valueless.      It   does   not    contain    anything 


74  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

which  informs  the  payee  what  is  to  be  done  in  order  to  fix  the 
liabihty  of  the  signer.  If  the  undertaking"  of  the  signer  is  not  ab- 
solute, it  is  nothing.     *     *     * 

We  are  of  the  opinion  that  the  instrument  sued  on  was  in  legal 
effect  a  promissory  note,  and  that,  /being  duly  attested,  action  on 
it  was  not  barred  by  the  statute  of  liinirations. 

Exceptions  overruled. 


GORDON  V.  LANSING  STATE  SAVINGS   BANK. 

(Supreme  Court  of  Michigan,  1903.     133  Mich.  143,  94  N.  W.  741.) 

Assumpsit  by  Gordon  against  the  bank  to  recover  the  balance 
of  a  deposit.  From  a  judgment  for  plaintiff,  defendant  brings  er- 
ror 

Moore,  J.  This  case  was  tried  by  the  circuit  judge  without  a  jury. 
At  the  request  of  the  defendant,  he  made  a  finding  of  facts,  which 
is  as  follows : 

"Monday  morning,  December  9,  1901,  at  about  9  o'clock,  there 
was  presented  at  the  bank  of  defendant  at  the  city  of  Lansing  for 
payment  the  following  check,  made  upon  the  printed  form  of  check 
supplied  by  defendant  to  its  patrons,  and  signed  by  plaintiff",  viz. : 

"  'Lansing,  Mich.  190  No. 

"  'Lansing  State  Savings  Bank  of  Lansing. 

"  'Pay  to  the  order  of Nine  Hundred  and 

Seventy  Dollars— $970.00.  Jno.  R.  Gordon.' 

"The  check  was  indorsed  by  Charles  P.  Downey,  and  was  pre- 
sented by  an  employe  of  Mr.  Downey,  and  cash  was  paid  at  the 
time  of  its  presentation.  The  plaintiff'  had  been  a  depositor  at  de- 
fendant's bank  at  periods  for  three  or  four  years,  and  at  the  open- 
ing of  the  bank  on  the  morning  of  December  9,  1901,  his  balance 
or  credit  upon  the  books  of  the  bank  was  $3.40,  but  during  the  day 
$2,997.50  was  added  to  plaintiff's  credit.  The  day  defendant  cashed 
the  check  plaintiff  was  at  the  bank,  and  was  informed  that  the 
check  for  $970  had  been  cashed  by  payment  to  Mr.  Downey,  and 
he  then  notified  defendant  he  would  not  accept  that  check  as  a 
voucher  for  the  money  paid.  December  14,  1901,  plaintiff  prepared 
and  presented  to  defendant  his  check,  payable  to  himself,  for  $970, 
being  the  amount  he  claimed  to  then  have  on  deposit  in  the  bank. 
Payment  on  this  check  was  refused  by  defendant  upon  the  ground 
that  plaintiff  had  no  funds  in  the  bank." 

The  circuit  judge  rendered  a  judgment  in  favor  of  the  plaintiff 
for  $970  and  interest.    The  case  is  brought  here  by  writ  of  error. 

Two   questions  are  discussed  by   counsel:    First,   the   effect   of_ 
not  dating  the  check ;    second,  has  the  check  apayee?    We  do  not 
deem  it  necessary  to  discuss  the  first  question. 

As  to  the  second  question,  it  will  be  noticed  the  drawer  of  the 


SPECIFICATION    OF    TARTIKS  '-J 

check  did  not  name  a  pajce  therein,  nor  did  he  Rave  a  blank  space 
wKere  the  name  of  a  payee  might  be  inserted,  nor  did  he  nanie  an 
impersonaTpayce.  In  the  case  of  Alclntosh  v.  Lytle",  26  Minn.  336, 
3  N.  W.  983,  Z7  Am.  Rep.  410,  the  court  used  the  following  lan- 
guage :  "A  check  must  name  or  indicate  a  payee.  Checks  drawn 
payable  to  an  impersonal  payee,  as  to  'Bills  Payable'  or  order,  or 
to  a  numl)er  or  order,  are.  held  to_bc  payable  to  bearer,  on  the 
ground  that  tli£._use  of  thejiX)rds  'or  order'  indicates  an  intention 
that  the  paper  shall  be  negotiable;  and  the  mention  of  an  imper- 
sonal payee,  rendering  an"lndorsement  by  the  payee  impossible, 
indicates  an  intention  that  it  shall  be  negotiable  without  indorse- 
ment— that  is,  that  it  shall  be  payable  to  bearer.  So,  when  a  bill, 
or  note  or  check  is  made  payable  to  a  blank  or  order,  and  actually 
delivered  to  take  effect  as  commercial  paper,  the  person  to  whom 
delivered  may  insert  his  name  in  the  blank  space  as  payee,  and  a 
bona  fide  holder  may  then  recover  on  it.  These  cases  differ  es- 
sentially from  the  one  at  bar.  In  the  latter  case  the  person  to 
whom  delivered  is  presumed,  in  favor  of  a  bona  fide  holder,  to  have 
had  authority  to  insert  a  name  as  payee.  In  the  former  cases  the 
instrument  is,  wdien  it  passes  from  the  hands  of  the  maker,  com- 
plete, in  just  the  form  the  parties  intend.  But  in  this  case  there 
is  neither  a  blank  space  for  the  name  of  the  payee,  indicating  au- 
thority to  insert  the  payee's  name,  nor  is  the  instrument  made 
payable  to  an  impersonal  payee,  indicating  a  fully  completed  in- 
strument. It  is  claimed  that  the  words  'on  sight'  are  such  imper- 
sonal payee.  They  were  inserted,  however,  for  another  purpose — 
to  fix  the  time  of  payment,  and  not  to  indicate  the  payee.  It  is 
clearly  the  case  of  an  inadvertent  failure  to  complete  the  instru- 
ment intended  by  the  parties.  The  drawer  undoubtedly  meant  to 
draw  a  check,  but,  having  left  out  the  payee's  name,  -without  insert- 
ing in  lieu  thereof  words  indicating  the  bearer  as  a  payee,  it  is  as 
fatally  defective  as  it  would  be  if  the  draw^ee's  name  w-ere  omitted." 
See,  also,  Rush  et  al.  v.  Haggard,  68  Tex.  674,  5  S.  W.  683 ;  Prewitt 
V.  Clrapman,  6  Ala.  86;  Brown  v.  Gilman  et  al.,  13  Mass.  160; 
Rich  et  al.  v.  Starbuck,  51  Ind.  87;  Norton,  Bills  &  Notes  (3d  Ed.) 
p.  59,  and  notes;   1  Daniel,  Neg.  Inst.  (4th  Ed.)  §  102. 

The  case  diff'ers  from  the  one  at  bar  in  some  respects,  but  the 
important  part  of  the  decision  is  that  a  payee  is  necessary  to  make 
a  complete  instrument,  and,  even  though  the  maker  of  the  check 
may  have  intended  to  name  a  payee,  if  he  has  not  in  fact  done  so 
the  check  is  incomplete.  In  the  case  at  bar  the  failure  to  name  a 
payee  was  not  an  oversight,  if  we  may  judge  from  what  Mr. 
Gordon  did,  as  will  appear  more  in  detail  later. 

Our  attention  has  been  called  to  Crutchly  v.  ]\Iann,  5  Taunt.  529. 
In  this  case  the  bill  of  exchange  was  made  payable  to  the  order  of 

The  court  found  that,  under  the  facts  shown,  the 

conclusion   was  irresistible  that  the  name  was  filled   in   with  the 


76  BILLS  AND    NOTES-  AND  THEIR  REQUISITES 

consent  of  the  drawer.  The  same  case  was  previously  reported  in 
2  :Maule  &  S.  90  (Cruchley  v.  Clarance),  where,  as  the  case  then 
stood,  it  appeared  the  bill  of  exchange  had  been  sent  out,  the  de- 
fendant leaving  a  blank  for  the  name  of  the  payee.  One  of  the 
judges  was  of  the  opinion  that  the  defendant,  by  leaving  the  blank, 
undertook  to  be  answerable  for  it,  when  tilled  up  in  the  shape  of  a 
bill  of  exchange;  another  judge  was  of  the  opinion  that  it  was  as 
though  the  defendant  had  made  the  bill  payable  to  bearer;  while 
the  third  judge  was  of  the  opinion  that  the  issuing  of  the  bill  in 
blank  without  the  name  of  the  payee  was  an  authority  to  a  bona 
fide  holder  to  insert  the  name. 

In  the  case  of  Harding  v.  State,  54  Ind.  359,  a  promissory  note 
was  drawn,  leaving  a  blank  space  for  the  name  of  the  payee ;  and 
it  was  held:  "So  the  name  of  the  payee  may  be  left  blank,  and 
this  will  authorize  any  bona  fide  holder  to  insert  his  own  name. 
1  Pars.  Notes  &  B.  33."  In  the  case  of  Brummel  v.  Enders,  18 
Grat.  (Va.)  873,  promissory  notes  blank  as  to  the  names  of  the 
payees  had  been  put  in  the  hands  of  an  agent  to  be  sold  for  the 
benefit  of  the  makers.  The  agent  sold  them,  at  a  greater  discount 
than  the  legal  rate  of  interest,  to  purchasers  who  did  not  know  they 
were  sold  for  the  benefit  of  the  makers.  At  the  time  of  the  sale 
the  names  of  the  purchasers  were  inserted,  either  by  the  purchas- 
ers or  by  the  agent,  in  the  blank  left  for  the  payee.  When  the  notes 
were  sued  the  makers  pleaded  usury.  The  court,  following  the 
cases  already  cited,  held  that  any  bona  fide  holder  of  a  bill  or  note 
which  is  blank  as  to  the  name  of  the  payee  may  insert  his  own 
name  and  thus  acquire  all  the  rights  of  the  payee. 

It  will  be  observed  that  the  case  at  bar  differs  from  all  of  these  cases. 
As  before  stated  not  only  did  Mr.  Gordon  fail  to  insert  the  name  of  a 
payee,  or  to  leave  a  blank  where  the  name  of  the  payee  might  be  in- 
serted, but  he  did  more.  He  drew  a  line  through  the  blank  space 
making  it  impossible  for  any  one  else  to  insert  therein  a  name,  indi- 
cating very  clearly  that  he  not  only  declined  to  name  a  payee  but 
intended  to  make  it  impossible  for  any  one  else  to  do  so.  Had  Mr. 
Gordon  issued  a  check  otherwise  perfect,  but  with  the  blank  space  for 
the  amount  of  the  check  unfilled,  and  delivered  it  to  a  third  person  it 
would  be  presumed  the  third  person  was  given  authority  to  fill  the 
blank  space.  But  had  he,  instead  of  leaving  the  space  a  blank  filled  it 
by  drawing  a  line  through  it,  would  any  one  say  the  third  person  might 
then  insert  a  sum  of  money  in  that  space?  If  not,  upon  what  principle 
may  the  name  of  a  payee  be  inserted  when  the  space  was  filled  in  the 
same  way,  or  upon  what  theory  may  it  be  presumed  there  was  an  im- 
personal payee  when  the  maker  has  not  made  the  check  payable  to 
cash  or  some  other  impersonal  payee?  In  order  to  construe  the  check 
as  a  complete  instrument,  we  must  read  into  it  an  intention  not  only  not 
expressed  by  its  language,  but  contrary  to  the  act  of  the  maker.  The 
check,  as  it  appears  to-day,  is  without  any  payee.    The  record  is  silent 


SrECIFICATION   OF   PARTIES  ^^ 

in  relation  to  whom  it  was  delivered,  or  whether  the  person  who  pre- 
sented it  at  the  bank  or  the  person  whose  indorsement  it  bears  was 
a  bona  fide  holder. 
Judgment  is  affirmed. 
Hooker,  C.  J.,  concurred  with  Moore,  J. 

Carpenter,  J.  I  regret  that  I  cannot  concur  in  the  opinion  of  my 
Brother  Moore.  I  agree  with  him  that  the  check  in  question  is  not 
governed  by  the  authorities  which  hold  that,  where  a  blank  is  left  for 
the  insertion  of  the  name  of  a  payee,  the  instrument  is  to  be  treated 
as  payable  to  bearer.  I  cannot  agree,  however,  that  the  case  of  Mcin- 
tosh V.  Lytle,  26  Minn.  336,  3  N.  W.  983,  37  Am.  Rep.  410,  is  control- 
ling. That  case  resembles  this  in  many  particulars.  There  is,  however, 
a  difference  which,  in  my  judgment,  renders  the  reasoning  of  that  case 
inapplicable.  The  fact  that  the  plaintiff  in  the  case  at  bar  used  the 
ordinary  blank,  and  drew  a  line  through  the  space  intended  for  the 
name  of  the  payee  prevents  our  assuming,  as  did  the  court  there — and 
its  decision  was  based  on  this  assumption — that  it  is  "the  case  of  an 
inadvertent  failure  to  complete  the  instrument  intended  by  the  parties." 
The  instrument  under  consideration  is  obviously  complete,  in  just  the 
form  the  maker  intended. 

In  my  judgment,  the  authorities  which  hold  a  check  payable  to  the 
order  of  an  impersonal  payee  to  be  valid  and  negotiable  control  this 
case.  r"quote  from  the  case  of  Willets  v.  Bank,  2  Duer  (N.  Y.)  at  page 
129:  "One  of  the  checks  was  payable  to  the  order  of  1658,  the  other 
three  to  the  order  of  bills  payable ;  and,  as  the  required  order  could  not 
in  either  case  possibly  be  given,  the  checks,  unless  transferable  by  de- 
livery, were  payable  to  no  one,  and  were  void  upon  their  face.  The 
law  is  well  settled  that  a  draft  payable  to  the  order  of  a  fictitious  per- 
son, inasmuch  as  a  title  cannot  be  given  by  an  indorsement,  is,  in  judg- 
ment of  law,  payable  to  bearer.  Vere  v.  Lewis,  3  Term  R.  183  ;  Minet 
V.  Gibson,  Id.  481 ;  Gibson  v.  Minet,  1  H.  Black,  569,  affirmed  in  the 
House  of  Lords.  And  it  seems  to  us  quite  manifest  that  in  principle 
these  decisions  embrace  the  present  case.  At  any  rate,  the  bank,  by 
certifying  the  checks  as  good,  is  estopped  from  denying  that  they  were 
valid  as  drafts  upon  the  funds  of  the  maker,  and,  consequently,  were 
payable  to  bearer.  The  giving  of  such  a  certificate,  if  otherwise  con- 
strued, would  be  a  positive  fraud." 

In  Mechanics'  Bank  v.  Straiton,  3  Abb.  Dec.  (N.  Y.)  269,  a  check 
payable  to  bills  payalile  or  order  was  held  payable  to  bearer,  the  court 
saying:  "By  naming  the  persons  to  whose  order  the  instrument  is 
payable,  the  maker  manifests  his  intention  to  hmit  its  negotiability  by 
imposing  the  condition  of  indorsement  upon  its  first  transfer.  But 
no  such  intention  is  indicated  by  the  designation  of  a  fictitious  or  mi- 
personal  payee,  for  indorsement  under  such  circumstances  is  manifestly 
impossible;  and  words  of  negotiability,  when  used  in  connection  with 
such  designations,  are  capable  of  no  reasonable  interpretation  except 


78  BILLS  AND    NOTES  AND   THEIR   REQUISITES 

as  expressive  of  an  intention  that  the  bill  shall  be  negotiable  without 
indorsement — i.  e.,  in  the  same  manner  as  if  it  had  been  made  payable 
to  bearer." 

We  must  decide  that  the  check  in  the  case  at  bar,  like  those  in  the 
cases  cited,  is  either  altogether  void,  or  is  transferable  by  delivery.  I 
submit  that  we  should  follow  those  cases,  and  decide  that  it  is  transfer- 
able by  delivery.  To  quote  the  language  of  Lord  Ellenborough,  in 
Cruchley  v.  Clarance,  2  Maule  &  S.  90 :  "As  the  defendant  has^hose^ 
to  send  the  bill  [check]  into  the  world  in  this  form,  the  world  ought 
not  to  be  deceived  by  his  acts."  This  view  of  the  case  compels  me  to 
notice  the  fact  that  the  check  under  consideration  is  not  dated.  Ac- 
cording to  the  weight  of  authority,  this  omission  does  not  invalidate  it. 
See  Zane,  Banks,  §  152;  2  Daniel,  Neg.  Inst.,  §  1577;  Norton,  Bills 
&  N.  (3d  Ed.)  p.  405,  note. 

I  think  the  judgment  of  the  court  below  should  be  reversed,  and  a 
judgment  entered  in  this  court  for  the  defendant. 

Grant,  J.,  concurred  with  Carpenter,  J.     Montgomery,  J.,  did 
not  sit. 


SEABOARD  NAT.  BANK  v.  BANK  OF  AMERICA. 

(Court  of  Appeals  of  New  York,  190S.     193  N.  Y.  2G,  85  N.  E.  829,  22  L.  R.  A. 

[N.  S.]  499.) 

Action  by  the  Seaboard  National  Bank  against  the  Bank  of  America. 
From  a  judgment  of  the  Appellate  Division  (118  App.  Div.  907,  103 
N.  Y.  Supp.  1141),  affirming  a  judgment  for  plaintiff  at  the  Trial  Term 
(51  Misc.  Rep.  103,  100  N.  Y.  Supp.  740),  and  an  order  denying  a  new 
trial,  defendant  appeals.    Affirmed. 

Three  persons  doing  business  under  the  firm  name  of  E.  V.  Babcock 
&  Co.,  at  Pittsburg,  Pa.,  were  depositors  in  the  Federal  National  Bank 
of  that  city.  One  Pennock  was  the  auditor  and  chief  bookkeeper,  and 
known  by  said  bank  to  be  in  the  employ  of  said  firm.  On  September 
17,  1904,  said  Pennock  went  to  said  bank,  and  presented  a  check  pur- 
porting to  be  signed  by  said  firm,  drawn  upon  said  bank,  payable  to 
the  order  of  "N.  Y.  Draft,"  for  $2,000,  and  requested  said  bank  to  give 
him  a  New  York  draft  for  $2,000,  payable  to  the  order  of  "Carroll 
Bros."  A  draft  was  drawn  by  said  bank  upon  the  plaintiff,  a  banking 
institution  in  the  city  of  New  York,  and  delivered  to  said  Pennock. 
Said  Pennock  thereupon  went  to  the  Mellon  National  Bank  of  Pitts- 
burg, Pa.,  in  which  bank  he  had  a  personal  account,  and  he  thereupon 
signed  the  name  of  "Carroll  Bros."  on  the  back  of  said  draft,  and  de- 
posited the  same  to  his  account  in  said  Mellon  National  Bank.  The 
draft  was  indorsed  by  the  Mellon  National  Bank,  and  forwarded  to  its 
correspondent,  the  defendant,  in  the  city  of  New  York.  The  defend- 
ant collected  said  draft  of  the  plaintiff,  through  the  clearing  house  in 
the  city  of  New  York  in  the  usual  course  of  business.    The  check  upon 


SPECIFICATION   OF   TARTIES  T9 

the  Federal  National  Bank,  which  purported  to  be  signed  by  E.  V. 
Babcock  &  Co.,  was  a  forgery.  "Carroll  Bros."  is  a  partnership,  com- 
posed of  two  members,  doing  business  in  Pennsylvania,  and  it  had  deal- 
ings from  time  to  time,  with  said  E.  V.  Babcock  &  Co.,  but  in  the 
dealings  with  said  E.  V.  Babcock  &  Co.,  Carroll  Bros,  were  always  in- 
debted to  E.  V.  Babcock  &  Co.  The  indorsement  of  the  name  "Carroll 
Bros."  upon  said  draft  was  without  the  knowledge  or  authority  of  said 
Carroll  Bros.,  said  E.  V.  Babcock  &  Co.,  or  of  said  Federal  National 
Bank.  Subsequently  E.  V.  Babcock  &  Co.  acquired  knowledge  of  the 
transactions  relating  to  said  check  and  draft,  and  they  presented  proof 
of  the  facts  to  the  Federal  National  Bank,  and  the  amount  of  the^ 
check,  wtvicli  had  theretofore  been  charged  to  the  account  of  E.  V. 
Babcock  &  Co.,  was  recredited  to  it.  The  Mellon  National  Bank  re- 
fused to  make  restitution  to  the  Federal  National  Bank.  The  Federal 
National  Bank  had  at  all  times  mentioned  an  active  account  with  the 
plaintiff,  and  the  plaintiff  charged  the  amount  of  said  draft  so  paid  by 
it  to  the  Federal  National  Bank,  and  returned  the  draft  as  a  voucher 
to  it.  When  the  Mellon  National  Bank  refused  to  make  restitution 
to  the  Federal  National  Bank,  it  forwarded  the  draft  to  the  plaintiff, 
and  the  plaintiff  restored  to  the  Federal  National  Bank  the  amount  it 
had  charged  to  it  by  reason  of  said  draft,  and  thereupon  tendered  the 
draft  to  the  defendant,  and  demanded  restitution  of  the  amount  paid 
by  the  plaintiff'  to  the  defendant  on  said  draft,  which  demand  was  re- 
fused. Said  draft  was  made,  executed,  and  dehvered  by  said  Federal 
National  Bank  upon  the  request  of  said  Pennock,  who  purported  to 
represent  E.  V,  Babcock  &  Co.,  and  said  Federal  National  Bank  handed 
said  draft  to  said  Pennock  accordingly.  Prior  to  the  time  when 
the  Federal  National  Bank  ascertained  the  true  facts  about  said  clieck 
and  draft,  the  amount  of  the  draft  credited  by  the  Mellon  National 
Bank  to  said  Pennock  was  withdrawn  from  the  bank,  and  said  Pennock 
had  died  insolvent.  This  action  was  brought  to  recover  the  amount 
of  said  draft,  and  judgment  was  entered  in  favor  of  the  plaintiff,  from 
which  judgment  an  appeal  was  taken  to  the  Appellate  Division  of  the 
Supreme  Court,  where  the  judgment  was  unanimously  affirmed,  and 
from  such  judgment  of  affirmance  an  appeal  is  taken  to  this  court. 

Chase,  J.  (after  stating  the  facts  as  above).  The  Federal  National 
Bank  was  a  depositor  with  the  plaintiff.  The  relation  existing  between 
a  bank  and  a  depositor  being  that  of  debtor  and  creditor,  the  bank 
can  justify  a  payment  on  the  depositor's  account  only  upon  the  actual 
direction  of  the  depositor.  Critten  v.  Chemical  National  Bank,  171  N. 
Y.  219,  63  N.  E.  969,  57  L.  R.  A.  529.  It  is  provided  by  the  Nego- 
tiable Instruments  Law  that:  "Where  a  signature  is  forged  or  made 
without  authority  of  the  person  whose  signature  it  purports  to  be,  it 
is  wholly  inoperative,  and  no  right  to  retain  the  instrument,  or  to  give 
a  discharge  therefor,  or  to  enforce  payment  thereof  against  any  party 
thereto,  can  be  acquired  through  or  under  such  signature,  unless  the 


80  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

party,  against  whom  it  is  sought  to  enforce  such  right,  is  precluded 
from  setting  up  the  forgery  or  want  of  authority."  Laws  1897,  p. 
727,  c.  612,  §  42.  If  it  was  necessary  for  Carroll  Bros,  to  indorse  the 
draft  before  it  could  be  paid  by  the  plaintiff  to  the  account  of  the 
Federal  National  Bank,  then  it  was  never  so  indorsed,  because  Pen- 
nock's  act  was  a  forgery,  and  wholly  inoperative.  The  defendant 
cannot  retain  the  money  paid  to  it  by  the  plaintiff  upon  such  unindorsed 
draft,  for  the  very  excellent  reason  that  it  had  no  title  to  the  instrument 
upon  which  the  money  was  paid.  It  is  further  provided  by  the  Nego- 
tiable Instruments  Law  (section  28)  as  follows:  "The  instrument  is 
payable  to  bearer:  (1)  When  it  is  expressed  to  be  so  payable;  or  (2) 
when  it  is  payable  to  a  person  named  therein  or  bearer ;  or  (3)  when  it 
is  payable  to  the  order  of  a  fictitious  or  nonexisting  person,  and  such 
fact  was  known  to  the  person  making  it  so  payable ;  or  (4)  when  the 
name  of  the  payee  does  not  purport  to  be  the  name  of  any  person ;  or 
(5)  when  the  only  or  last  indorsement  is  an  indorsement  in  blank." 

It  is  claimed  by  the  defendant  that  the  draft  was  payable  to  a  ficti- 
tious or  nonexisting  person,  and  consequently  writing  the  signature  of 
Carroll  Bros,  on  the  back  of  the  draft  was  not  in  legal  effect  a  forgery, 
and  not  necessary  to  protect  the  plaintiff  in  its  payment.  The  defend- 
ant also  claims  that  the  Federal  National  Bank  was  negligent  in  not  dis- 
covering that  the  check  of  E.  V.  Babcock  &  Co.  presented  to  it  by  Pen- 
nock  was  forged,  and  that  such  negligence  should  prevent  the  plaintiff 
from  recovering  against  the  defendant  in  this  action.  The  draft  was 
obtained  from  the  Federal  National  Bank  by  fraud.  It  was  a  fraud 
perpetrated  by  the  same  person,  who,  within  a  short  time  after  perpe- 
trating it,  fraudulently  obtained  the  money  upon  the  draft  from  the 
Mellon  National  Bank,  but  the  fraudulent  acts,  so  far  as  they  concerned 
persons  other  than  Pennock,  were  wholly  unrelated.  The  Federal  Na- 
tional Bank  was  the  only  one  concerned  in  the  consideration  accepted 
by  it  in  issuing  the  draft.  The  question  in  this  action,  therefore,  is  not 
dependent  in  any  way  upon  the  facts  relating  to  the  consideration  for 
the  draft,  or  as 'to  whether  the  consideration  for  the  draft  was  real  or 
fictitious,  but  whether,  upon  all  the  facts  disclosed,  the  draft  was  le- 
gally collected  from  the  plaintiff  by  one  other  than  its  payee,  or  as 
ordered  by  it.  The  transaction  between  the  plaintiff  and  the  defendant 
had  no  legal  connection  with  the  fraud  by  which  Pennock  obtained  the 
draft  from  the  Federal  National  Bank.  We  are  of  the  opinion  that 
the  alleged  negligence  on  the  part  of  the  Federal  National  Bank  is  im- 
material in  this  action,  because  no  act  of  the  Mellon  National  Bank  or 
of  the  defendant  was  induced  by  the  acts,  representations,  or  admis- 
sions of  the  Federal  National  Bank.  We  also  think  that  the  defendant 
is  wrong  in  its  contention  that  the  draft  was  payable  to  bearer  as  de- 
fined in  the  Negotiable  Instruments  Law.  It  is  only  when  a  person 
making  an  instrument  knows  that  he  is  making  it  payable  to  a  fictitious 
or  nonexisting  person  that  it  can  be  treated  as  payable  to  bearer. 


SPECIFICATION    OF   PARTIES  81 

The  appellant  asserts  that  a  person  to  whom  a  draft,  made  payable  to 
a  third  person,  is  issued  can,  while  he  remains  the  owner  thereof,  divert 
it  TFoTTTrlR'c  ""purpose  for  which  it  was  intended,  and  that,  for  the  pur- 
pose of  such  diversion,  or  of  returning  the  amount  of  the  draft  to  his 
account  in  the  bank,  he  can  indorse  the  payee's  name  thereon  without 
being  liable  for  the  crime  olTorger}^^  Assuming  fhat,  in  cases  where 
the  draft  has  never  been  delivered  to  the  payee,  or  the  payee  has  not 
in  some  way  obtained  a  vested  interest  therein,  the  appellant  is  right  in 
its  claim,  the  assumed  authority  to  so  indorse  the  payee's  name  thereon 
does  not  arise  because  the  draft  is  payable  in  legal  effect  to  bearer,  but 
because  of  tlie  fact  that  suchan  act  of  the  owner  is  harmless.  Such 
means  o^  recalling  a  proposed  transaction,  or  of  changing  the  use  to 
be  made  of  a  draft,  is  sustained  upon  the  right  that  a  person  has  to 
do-as  he  pleases  with  his  own,  and  for  that  reason,  until  the  rights  of 
others  in  the  draft  have  become  vested,  the  acts  of  the  owner  therewith 
are  innocent  and  colorless.  An  irregular  form  of  indorsement  of  com- 
mercial paper  is  frequently  observed  and  approved,  when  such  paper  is 
indorsed  only  for  deposit  to  the  credit  of  the  payee.  Actual  ownership 
of  commercial  paper  and  use  thereof  by  the  owner  are  essential  to 
sustain  irregular  indorsements.  The  bank  in  issuing  the  draft  in  ques- 
tion dealt  with  Pennock,  but  with  Pennock  as  the  representative  of  E. 
V.  Babcock  &  Co.,  and  not  with  him  individually.  Pennock  did  not 
purport  to  act  individually,  or  to  exercise  individual  intention.  The 
draft  issued  was  the  obligation  of  the  Federal  National  Bank.  It  was 
payable  to  a  real  partnership.  The  conceded  transaction,  so  far  as  it 
was  expressed  in  acts  or  words,  including  the  delivery  of  the  check 
charging  the  amount  thereof  to  E.  V,  Babcock  &  Co.,  and  the  receipt 
of  the  draft  in  return  for  the  check,  was  not  with  Pennock  individually, 
and  he  did  not  become  the  owner  of  the  draft  with  any  rights  therein 
as  owner.  The  secret  intention  of  a  criminal,  contrary  to  his  express 
intention,  and  the  avowed  purpose  for  which  he  obtains  possession  of  a 
draft,  does  not  give  the  criminal  ownership  of  the  draft,  or  a  legal  right 
to  change  a  draft,  payable  to  a  real  payee,  to  one  payable  to  bearer. 
There  is  no  presumption  arising  from  the  facts  proven  that  the  name 
"Carroll  Bros."  was  intended  as  a  fictitious  or  nonexisting  payee.  Such 
intention,  to  be  effective,  must  necessarily  arise  from  knowledge,  and 
exist  as  an  affirmative  fact  in  the  mind  of  the  drawer  of  a  draft  at  the 
time  of  its  delivery.  There  is  nothing  in  this  case  to  estop  the  plaintiff 
from  controverting  the  geiuiineness  of  the  indorsement  of  the  draft  in 
controversy  as  in  Coggill  v.  American  Exchange  Bank,  1  N.  Y.  113, 
49  Am.  Dec.  310,  where  one  of  the  members  of  a  partnership,  the  mak- 
ers of  a  draft,  put  it  into  circulation,  with  the  forged  indorsement  of 
the  payee  upon  it,  or  as  in  Phillips  v.  Mercantile  National  Bank,  140  N. 
Y.  556,  35  N.  E.  982,  23  L.  R.  A.  584,  37  Am.  St.  Rep.  596,  where  the 
person  who  forged  the  name  of  the  payee  was  the  cashier  of  the  de- 
MooKE  Cases  B.&  N. — 6 


82  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

fendant,  empowered  to  bind  the  bank  by  his  checks.  The  legal  effect 
of  making  a  note  or  bill  payable  to  a  fictitious  person  was  stated  in 
Rev.  St.  pt.  2,  c.  4,  tit.  2,  §  5,  as  follows :  "Such  notes,  made  payable 
to  the  order  of  the  maker  thereof,  or  to  the  order  of  a  fictitious  person, 
shall,  if  negotiated  by  the  maker,  have  the  same  effect,  and  be  of  the 
same  validity,  as  against  the  maker  and  all  persons  having  knowledge 
of  the  facts,  as  if  payable  to  bearer," 

Prior  to  the  enactment  of  the  Negotiable  Instruments  Law,  the  lan- 
guage of  which  makes  it  clear  that,  if  an  instrument  is  to  be  deemed 
payable  to  bearer,  although  in  form  payable  to  a  named  person,  the 
intention  to  make  the  instrument  payable  to  a  fictitious  or  nonexisting 
person  must  exist  with  the  maker  thereof,  this  court,  in  Shipman  v. 
Bank  of  the  State  of  New  York,  126  N.  Y.  318,  27  N.  E.  371,  12  L.  R. 
A.  791,  22  Am.  St.  Rep.  821,  referring  to  the  rule  stated  in  the  Revised 
Statutes,  said :  "We  are  of  the  opinion,  upon  examination  of  the  au- 
thorities cited  by  counsel  on  both  sides,  that  this  rule  applies  only  to 
paper  put  into  circulation  by  the  maker  with  knowledge  that  the  name 
of  the  payee  does  not  represent  a  real  person.  The  maker's  intention 
is  the  controlling  consideration  which  determines  the  character  of  such 
paper.  It  cannot  be  treated  as  payable  to  bearer  unless  the  maker 
knows  the  payee  to  be  fictitious,  and  actually  intends  to  make  the  paper 
payable  to  a  fictitious  person."  The  court  further  say :  "Bedell  (the 
employe  who  signed  the  names  of  the  payees)  of  course  knew  that  the 
payees  were  fictitious,  but  he  was  not  acting  within  the  scope  of  his  em- 
ployment, but  in  carrying  out  a  scheme  of  fraud  upon  the  plaintiffs, 
and  under  such  circumstances  his  knowledge  cannot  be  imputed  to  his 
principals." 

.Selover  in  his  work  on  Negotiable  Instruments  Law  (page  70)  says: 
"The  doctrine  that  a  check  or  bill  made  payable  to  a  fictitious  person 
is  payable  to  bearer,  and  negotiable  without  indorsement  if  the  fictitious 
character  of  the  payee  was  known  to  the  parties,  originated  in  England, 
and  in  each  of  the  cases  holding  the  doctrine  the  decision  was  based 
on  the  fact  that  the  acceptor  knew,  at  the  time  of  his  acceptance,  that 
the  instrument  was  payable  to  a  fictitious  person.  If  the  drawer  or 
maker  of  an  instrument  did  not  know  that  the  payee  was  a  fictitious 
or  nonexistent  person,  and  did  not  intend  to  make  the  paper  payable 
to  such  person,  paper  payable  to  the  order  of  such  person  cannot  be 
treated  as  payable  to  bearer,  for  the  intention  of  the  maker  or  drawer 
is  the  test." 

Bunker  on  Negotiable  Instruments,  in  his  note  to  a  section  of  the 
Negotiable  Instruments  Law  of  Michigan  (section  11),  corresponding 
to  and  the  same  as  section  28  of  the  Negotiable  Instruments  Law  in 
this  state,  compares  the  bills  of  exchange  act  of  England  (section  7) 
with  the  statute  of  Michigan,  and  says :  "The  difference  between  the 
two  statutes  is  important.  The  element  of  knowledge  is  the  distin- 
guishing feature.     Under  the  English  statute  the  paper  is  payable  to 


SPECIFICATION   OF   PARTIES 


83 


bearer  if  the  payee  be  a  fictitious  or  nonexisting  person.  Under  the 
American  statute  paper  payable  to  a  fictitious  or  nonexisting  person 
is  not  payable  to  bearer  unless  the  maker  or  drawer  knew  that  the 
payee  was  a  fictitious  or  nonexisting  person.  Under  the  English  stat-_ 
ute  the  fact  governs ;  under  the  American  statute  the  fact  coupled  with 
knowledge  governs.  Thus  there  has  been  carried  into  the  two  statutes 
the  dilTercnces  heretofore  existing  in  the  authorities." 

In  Crawford's  Annotated  Negotiable  Instruments  Law  it  is  said  in 
a  note  to  section  28,  referring  to  the  case  of  Shipman  v.  Bank  of  the 
State  of  New  York,  supra,  and  quoting  from  the  opinion :  "Hence  if 
the  maker  or  drawer  supposes  the  payee  to  be  an  actually  existing  per- 
son (as  for  instance,  where  he  is  induced  by  fraud  to  draw  the  instru- 
ment to  the  order  of  a  fictitious  person  whom  he  supposes  to  exist),  the 
instrument  will  not  be  payable  to  bearer,  and  no  person  can  acquire 
the  title  thereto  by  delivery.  And  where  the  instrument  is  drawn  pay- 
able at  a  bank,  the  bank  cannot  charge  the  same  to  the  account  of 
its  customer,  since  the  instrument  is  not  in  such  case  payable  to  bearer, 
and  the  indorsement  is  a  forgery." 

In  Eaton  and  Gilbert  on  Commercial  Paper  it  is  said :  "Under  the 
common  law  a  bill  payable  to  a  fictitious  person  or  his  order  was 
neither  in  effect  payable  to  the  order  of  the  drawer  nor  to  the  bearer, 
unless  if  was  shown  that  the  circumstance  of  the  payee  being  a  ficti- 
tious person  was  known  to  the  acceptor.  To  show  that  the  acceptor 
was  aware  that  the  payee  was  a  fictitious  person,  evidence  is  admissible 
of  the  circumstances  under  which  he  accepted  other  bills  payable  to  fic- 
titious persons.  The  fictitiousness  of  the  maker's  direction  to  pay  does 
not  depend  upon  identification  of  the  name  of  the  payee  with  some 
existing  person,  but  upon  the  intention  underlying  the  act  of  the  maker 
in  inserting  the  name.  The  rule  as  to  an  instrument  payable  to  the 
order  of  a  fictitious  or  nonexisting  person  applies  only  to  paper  put  in 
circulation  by  the  maker  with  knowledge  that  the  name  of  the  payee 
does  not  represent  a  real  person.  The  maker's  intention  is  the  con- 
trolling consideration.  It  cannot  be  treated  as  payable  to  bearer  un- 
less the  maker  knows  the  payee  to  be  fictitious,  and  actually  intends  to 
make  the  paper  payable  to  the  fictitious  person." 

Daniel  on  Negotiable  Instruments,  in  a  note  to  a  section  (section  139), 
in  which  he  says  that  lack  of  knowledge  of  the  maker  of  the  fictitious 
character  of  the  payee  is  not  a  defense  against  a  bona  fide  holder,  refers 
to  a  different  rule  in  this  state,  and,  after  calling  attention  to  our  Re- 
vised Statutes,  says :  "The  Court  of  Appeals,  construing  this  statute, 
held  that  such  paper  cannot  be  treated  as  payable  to  bearer  unless  it 
was  put  in  circulation  by  the  maker  with  knowledge  that  the  name  of 
the  payee  does  not  represent  a  real  person."  And,  further,  in  a  note  to 
the  same  section,  he  says:  "But  in  New  York  by  statute  the  maker 
is  not  bound  to  an  indorsee  even,  unless  he,  the  maker,  knew  of  the 
fiction  at  the  time  of  signing."     It  does  not  appear  that  the  Federal 


84  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

National  Bank  knew  Carroll  Bros,  was  a  fictitious  or  nonexisting  per- 
son, or  intended  that  the  instrument  should  be  payable  to  bearer. 
The  judgment  should  be  affirmed,  with  costs. 


VI.  Delivery 


23 


WORTH  V.  CASE. 
(Court  of  Appeals  of  New  York,  1870.     42  N.  T.  3G2.) 

Action  on  a  promissory  note.  Judgment  for  plaintiff.  Defendant 
appeals. 

The  defendant's  testator  delivered  to  the  plaintiff,  his  sister,  a  sealed 
envelope  on  which  there  was  an  indorsement  in  his  handwriting  and 
signed  by  him  in  the  following  words : 

"Mary  C.  Worth,  this  is  not  to  be  unsealed  while  I  live,  and  returned 
to  me  any  time  I  may  wish  it.    T.  B.  Worth." 

After  the  testator's  death,  the  plaintiff  opened  the  envelope  and 
found  in  it  a  note  in  his  handwriting,  and  signed  by  him,  in  the  follow- 
ing words : 

"Addison,  January  30th,  1864. 

"I  promise  to  pay  my  sister,  Mary  C.  Worth,  on  demand,  ten  thou- 
sand dollars,  in  consideration  of  services  rendered  to  me. 

"T.  B.  Worth." 

Foster,  J.^*  *  *  *  fl-,e  transfer  of  the  note  from  the  testator 
to  the  plaintiff  was  not  in  the  nature  of  a  gift  causa  mortis;  for  inde- 
pendent of  its  being  founded  upon  some  consideration,  the  testator, 
when  he  executed  it,  was  not  the  subject  of  any  physical  malady  which 
would  be  likely  to  end  in  his  death,  or  from  which  he  had  any  appre- 
hension that  his  death  would  ensue.  Neither  was  it  an  absolute  gift, 
inter  vivos,  because  there  was  some  consideration  for  it,  and  because 
also  the  delivery  of  it  was  a  conditional  one.  It  was  subject  to  revoca- 
tion by  the  maker  at  any  time  during  his  life;  and  it  was  also  subject 
to  the  further  condition,  that  the  plaintiff  should  not  open  the  envelope 
in  which  It  was  delivered  to  her  until  after  his  death.  It  was  not  in- 
tended by  the  maker  as  a  testamentary  bequest;  for  long  after  its 
original  delivery  to  the  plaintiff,  and  after  he  had  subsequently  had  it 
in  his  possession,  and  returned  it  to  her,  in  the  will  which  he  made, 
he  bequeathed  to  her  the  use  (while  she  remained  single)  of  $1,000, 
without  any  intimation  that  it  was  in  lieu  of  the  note ;  and  without 
any  reference  to  it,  and  without  any  attempt  on  his  part  then,  or  there- 

2  3  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
S5-37. 

2*  The  statement  of  the  case  is  abridged,  and  part  of  the  opinion  is  omitted. 


DELIVERY 


85 


after,  to  reclaim  it  from  her  possession.    It  was,  therefore,  manifestly 
his  intent,  that  the  note  should  be  hers  as  well  as  the  bequest. 

A  deed  executed  and  delivered  by  a  grantor,  which  is  to  take  effect 
so  as  to  pass  the  title  at  his  death,  is  not  in  any  sense  a  testamentary 
disposition  of  the  property  described  in  it ;  nor  is  a  note,  executed  and 
delivered,  and  accepted,  in  the  lifetime  of  the  maker,  but  made  payable 
at,  or  after  his  death,  such  a  disposition  of  it;  but,  in  both  cases,  the 
instrument  is  absolute,  and  passes  the  right  to  the  land  in  the  one  case, 
and  to  the  money  in  the  other,  to  vest  in  possession  or  action  at  the 
death  of  the  grantor  or  maker.  And,  if  the  note  in  question  was  de- 
livered and  accepted,  the  transaction  is  no  more  testamentary  than  in 
the  cases  of  the  deed  and  note  referred  to;  and  the  only  difference  is, 
that  in  those,  the  delivery  passed  the  right  without  power  of  revoca- 
tion and  without  condition ;  while  in  this,  the  power  of  revocation  and 
the  condition  continued  till  his  death.  I  think  there  are  but  two  ques- 
tions in  the  case. 

The  first  is,  whether  the  delivery,  in  the  manner  and  with  the  condi- 
tions specified,  and  under  all  the  circumstances  of  the  case,  was  such 
that,  if  the  note  was  founded  upon  a  sufficient  valuable  consideration,  it 
would  on  his  death  constitute  a  valid  and  legal  claim  against  his  estate ; 
and  if  so,  then,  second,  was  there  such  a  consideration  expressed,  and 
proved  by  parol,  as  would  make  the  note  a  valid  demand,  if  the  de- 
livery Tiad  been  absolute  and  unconditional  ? 

I  think  the  circumstances  show  that  the  maker  of  the  note  delivered 
it  to  her  with  the  intention  that  it  should  be  hers  absolutely,  unless  he 
should  thereafter  apply  to  her  for  its  redelivery,  or  unless  she  should 
open  the  envelope  during  his  hfe.  Or,  in  other  words,  that  he  intended 
to  pass  the  title  in  it  to  her,  subject  to  being  devested  (as  she  had  the 
possession)  by  either  of  those  acts ;  and  that,  if  neither  of  them  were 
performed,  the  title  to  the  note  should  remain  in  her.  It  was  not  deliv- 
ered to  her  as  an  escrozv,  for  such  a  delivery  must  be  made  to  some 
third  person ;  and,  as  a  general  rule,  an  escrow  is  made  to  await  some 
affirmative  action  on  the  part  of  the  other  party,  before  he  is  entitled 
to  the  absolute  delivery  of  the  instrument,  and  not  the  affirmative  ac- 
tion of  the  party  who  delivers  it  as  an  escrow.  The  delivery,  therefore, 
was  complete,  provided  there  was  an  acceptance  by  her. 

There  is  no  doubt  that  a  delivery  of  a  deed  or  note,  or  other  ob- 
ligation, to  one  person  in  favor  of,  and  for  the  benefit  of,  another, 
constitutes  a  valid  and  binding  delivery  as  against  the  party  who  de- 
livers it,  whether  the  party  in  whose  favor  it  is  delivered  is  owner  of  it 
or  not ;  and  for  the  purpose  of  protecting  his  interests,  the  law  holds 
the  party  receiving  the  delivery  as  his  trustee,  and  makes  his  acceptance 
of  it  the  acceptance  of  the  beneficiary.  And  this,  too,  whether  the 
person  receiving  the  delivery  knows  the  contents  of  the  instrument  or 
not,  and  whether  he  does  anything  more  than  merely  receive  it  or  not. 


86  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

And  yet,  where  the  person,  in  whose  favor  the  instrument  is  executed, 
will  be  injured  by  the  acceptance  of  it,  the  delivery  to  such  third  per- 
son does  not  bind  hi})i,  unless  he  authorized  such  acceptance  or  adopts 
it  by  some  subsequent  act. 

The  same  is  the  case  with  an  instrument  executed  and  delivered 
personally  to  an  idiot  or  lunatic.  If  beneficial  to  him,  the  party  ex- 
ecuting it  is  bound  by  it,  and  the  idiot  or  lunatic  is  entitled  to  its 
benefits ;  but  if  against  his  interests,  he  is  not  bound,  although  he  has 
received  the  delivery.  In  these  cases,  the  delivery  is  held  good,  though 
the  grantee  or  obligee  really  had  nothing  to  do  with  the  transaction,  in 
order  to  carry  out  the  intent  of  the  party  who  executed  the  instrument, 
and  for  the  benefit  of  the  party  for  whose  benefit  it  was  delivered,  and 
constitutes  an  acceptance  on  his  part,  when  for  his  interest  to  do  so, 
and  not  when  otherwise. 

Upon  what  principle  is  it,  then,  that  a  direct  delivery  of  an  obliga- 
tion to  the  obligee  himself,  and  a  reception  thereof  by  him,  does  not 
constitute  an  acceptance,  if  the  contents  of  the  instrument  delivered 
are  not  at  the  time  known  to  him  ? 

And  why  may  not  a  party  deliver  an  instrument,  the  contents  of 
which  are  not  known  to  the  party  receiving  it,  with  the  like  efliect  as 
if  it  were,  without  his  knowledge,  delivered  for  his  benefit  to  some  third 
person  for  him? 

Or,  suppose  that  on  the  30th  day  of  January,  1864,  Theron  B.  Worth 
had  been  indebted  to  the  plaintifif  in  the  exact  sum  of  $10,000,  and 
had  on  that  day  delivered  the  note  in  question  precisely  as  he  did,  and 
it  had  remained  in  the  possession  of  the  plaintiff  as  it  did,  till  his  death, 
is  it  possible  that  the  plaintiff  could  not  maintain  an  action  on  the 
note,  and  that  she  would  have  been  compelled  to  count  on  the  original 
indebtedness?  To  my  mind,  the  delivery  and  acceptance  were  more 
complete  than  in  any  of  the  other  cases  to  which  I  have  alluded.  The 
delivery  was  to  the  party  to  be  benefited ;  and  from  what  appears  it  is 
manifest  that,  when  she  received  it,  she  considered  it  to  be  something 
which  was  of  value  to  her.  He  had  told  her  that  he  would  pay  her 
well  for  the  services  performed  for  him,  and  had  offered  to  buy  her  a 
house  and  lot  in  compensation;  and  when  she  received  it,  on  the  day 
when  he  left  her  to  return  to  his  home,  she  could  not  doubt  that  it 
contained  the  compensation,  or  the  evidence  of  it,  which  he  had  prom- 
ised to  make  to  her ;  and  no  doubt  she  gladly  accepted  it  as  such,  in  the 
full  belief  that  it  contained  a  generous  compensation. 

As  nothing  happened  subsequently  to  the  delivery  which  would  in- 
validate the  note,  the  next  question  is,  were  the  conditions  such  as  to 
render  it  therefor  void  per  se? 

By  the  terms  of  the  delivery,  it  was  intended  to  be  valid,  if  neither 
of  two  affirmative  acts  were  afterward  done.  It  is  clear  that  neither 
of  these  acts  were  performed,  and  in  my  judgment_the  delivery  and 


DELIVERY  ^' 

acceptance  were  sufficient,  and  the^iiote^as  such,  remained  valid  in  the 
hands  of  the  plaintiff,  provided  it  was  executed  for  a  good  considera- 
tion.    *     '''     * 

Judgment  aflirmed. 


SMITH  V.  DOTTERWEICH. 

(Court  of  Appeals  of  New  York,  1011.    200  N.  Y.  299,  93  N.  E.  9So,  ?,?>  L.  R. 

A.  [N.  S.]  892.) 

Action  by  George  N.  Smith  against  Rudolph  Dotterweich.    From  a 
judgment  for  plaintiff  (132  App.  Div.  489,  116  N.  Y.  Supp.  896),  de- 
fendant appeals.    Reversed,  and  new  trial  ordered. 
See,  also,  118  App.  Div.  917,  103  N.  Y.  Supp.  1142. 
WEKNiiK,  J.    On  the  28th  day  of  February,  1901,  the  defendant  ex- 
ecuted  and  delivered  to  the  plaintiff  a  promissory  note  for  $3,740,  pay- 
able in  six  months.    When  this  note  became  due  it  was  renewed  by  the 
four  notes  in  suit,  which  were  dated  August  28,  1901,  and  payable  in 
six  months  from  that  date.     These  renewal  notes  were  not  paid  at 
maturity,  and  the  plaintiff'  brought  this  action  upon  a  complaint  in  the 
usual  form.    Upon  the  trial  the  plaintiff  introduced  evidence  to  show 
that  the  original  note  was  given  in  payment  of  premiums  upon  two 
life  insurance  policies  issued  to  the  defendant  by  the  John  Hancock 
Life  Insurance  Company  through  the  plaintiff,  as  its  general  agent. 

The  defendant  interposed  an  answer,  denying  that  the  notes  were 
given  for  value  received  and  that  the  plaintiff  was  the  lawful  holder  and 
owner  thereof,  and  alleging  an  oral  agreement  under  which  neither 
the  notes  nor  the  insurance  policies  were  to  become  valid  and  enforce- 
able obligations,  unless  the  plaintiff  should  secure  for  the  defendant  a 
certain  loan  of  money.    The  defendant's  testimony  in  support  of  these 
allegations  was  to  the  eft"cct  that  in  P'cbruary,  1901,  he  was  visited  in 
Olean  by  two  insurance  brokers  named  Marvin  and  Larabee,  who  so- 
licited him  to  take  some  life  insurance ;  that  he  at  first  replied  that  he 
did  not  want  any ;   that  he  afterwards  called  Larabee  into  his  private 
office  in  the  Dotterweich  Brewery  and  told  him  that  he  had  an  option 
to  buy  the  stock  of  the  brewing  company  and  wanted  to  raise  $70,000 
to  pay  for  it ;   that,  if  he  could  get  a  loan  for  that  amount  on  the  life 
insurance  and  the  brewing  company's  stock  as  collateral,  he  would  take 
the  insurance;    that  Larabee  assured  him  that  it  could  be  done,  and 
cited  instances  in  which  certain  department  stores  in  Buffalo  had  made 
loans  under  similar  conditions.    The  defendant  further  testified  that  a 
week  later  the  plaintiff',  Larabee,  and  Marvin  called;   that  after  he  had 
been  introduced  the  plaintiff  said:   "The  boys  have  been  talking— Mr. 
Larabee  and  Mr.  Marvin  have  been  talking — to  you  about  taking  out 
an  insurance  for  a  loan,"  and  I  said  "Yes."     He  says,  "Do  you  want 
it?"    I  said,  "I  do,  providing  you  can  make  the  loan."    "And  I^Ir.  Smith 
said  that  if  I  would  take  out  an  insurance  he  could  make  the  loan  for 


88  BILLS  AND    NOTES  AND  THEIR  REQUISITES 

me,  and  that  this  company  could  take  at  least  50,000  and  he  knew  where 
he  could  place  the  other  20.  They  even  advised  me  to  split  up  the 
policy,  so  that  they  wouldn't  have  any  trouble  making  the  loan." 

The  defendant  further  testified  that  he  met  the  plaintiff  in  Olean 
about  10  days  later,  at  which  time  the  latter  produced  the  policies;  that 
he  then  told  the  plaintifl:  "that  under  no  consideration  could  I  take 
out  a  policy  of  that  kind  without  he  could  guarantee  to  make  me  a 
loan" ;  that  when  the  plaintifif  handed  the  original  note  to  the  defend- 
ant, "I  told  him  there  was  no  use  of  my  signing  that  note  for  a  policy 
at  the  wages  I  was  getting.  I  was  getting  $75  a  month  and  I  couldn't 
pay  no  $100,000  insurance  on  $75  a  month,  and  he  said,  'You  sign 
this  note,  and  I  will  hold  it  in  my  safe  until  this  deal  is  closed,  and,  if 
it  is  not  closed,  I  return  you  the  note  and  you  return  me  the  policy. 
I  will  hold  this  note  in  my  safe  and  won't  try  to  sell  it.'  He  w^as  to 
loan  me  $70,000  at  5  per  cent,  for  five  years  or  ten,  and  with  the  privi- 
lege of  having  it  longer.  He  said  'I  can  get  you  the  $70,000  loan,  and 
I  can  get  it  for  you  at  5  per  cent,  for  five  years  or  ten,  with  the  privi- 
lege of  having  it  longer.'  He  said,  unless  I  would  sign  the  note  to  show 
that  everything  was  in  good  faith,  he  couldn't  make  me  the  loan  on  the 
policy.  He  said  there  wouldn't  be  any  efifect  in  the  policy ;  the  policy 
would  be  null  and  void  if  he  didn't  get  me  the  loan ;  that  they  would 
take  the  same  chance  as  I." 

These  are  the  circumstances  in  which  the  defendant  says  he  executed 
the  original  note  and  delivered  it  to  the  plaintiff,  receiving  at  the  same 
time  two  policies  issued  by  the  John  Hancock  Life  Insurance  Company 
for  $70,000  and  $30,000,  respectively,  together  with  receipts  showing 
that  the  premiums  for  the  first  year  had  been  paid. 

The  defendant  sought  to  show  what  took  place  in  August,  1901,  be- 
tween Marvin  and  himself  regarding  the  renewal  of  the  original  note, 
but  the  learned  trial  court  excluded  the  proffered  evidence,  upon  the 
ground  that  Marvin's  declarations  and  admissions  could  not  bind  the 
plaintiff,  as  there  was  no  proof  that  Marvin  had  authority  to  do  any- 
thing except  to  get  an  unconditional  renewal.  Then  the  defendant  fur- 
ther testified  that  the  plaintiff  never  procured  the  loan  for  him;  that 
soon  after  the  notes  in  suit  became  due,  and  before  this  action  was 
commenced,  he  went  to  the  plaintift"'s  office  in  Buffalo,  and  asked  for 
a  return  of  the  notes  and  tendered  back  the  policies. 

When  the  defendant  rested  his  case  the  learned  trial  court  granted 
the  plaintiff's  motion  for  the  direction  of  a  verdict,  and  to  this  ruling 
the  defendant  duly  excepted.  The  defendant  also  asked  the  court  to 
submit  to  the  jury  the  question  whether  the  insurance  policies  were 
accepted  by  the  defendant  and  the  original  note  was  delivered  to  the 
plaintiff,  upon  condition  that  the  same  should  be  returned  in  case  the 
plaintiff  did  not  within  a  year  procure  a  loan  of  $70,000  for  the  plain- 
tiff, with  the  insurance  policies  and  the  brewery  stock  as  collateraL 
This  motion  was  also  denied,  and  the  defendant  took  an  exception. 


DELIVERY  89 

We  have  quoted  or  cited  only  such  parts  of  the  evidence  as  bear 
directly  upon  the  question  whether  the  learned  trial  court  erred  in  di- 
recting a  verdict  for  the  plaintiff.  The  case  is  characterized  by  a  num- 
ber of  peculiarities  which  may,  or  may  not,  be  influential  in  determin- 
ing the  ultimate  result,  but  with  these  we  have  no  present  concern. 
The  question  now  before  us  is  whether  the  testimony  of  the  defendant, 
supplemented  by  such  legitimate  inferences  therefrom  as  are  most  favor- 
able to  him,  is  of  sufficient  weight  and  probative  force  to  create  a  ques- 
tion of  fact  for  the  jury,  and  that  question  obviously  depends  upon  the 
nature  and  effect  of  the  oral  agreement  to  which  he  testified.  If  that 
agreement,  which  for  present  purposes  must  be  assumed  to  have  been 
made,  created  a  condition  precedent,  without  tlie  performance  of  which 
the  notes  never  became  valid  obligations  in  favor  of  the  plaintiff,  then 
there  is  a  question  of  fact  for  the  arbitrament  of  a  jury.  The  con- 
verse of  the  proposition  is  equally  simple.  If  the  effect  of  that  agree- 
rnent  was  to  ingraft  upon  a  valid  contract  a  condition  subsequent,  the 
learned  trial  justice  was  right  in  ruling  that  the  issue  was  one  of  law 
for  his  decision.  A  careful  analysis  of  the  defendant's  testimony  has 
convinced  us  that  he  is  right  in  the  contention  that  the  case  should  have 
been  sent  to  the  jury.  He  testified  that  he  told  the  plaintiff  that 
under  no  consideration  would  he  take  the  insurance,  unless  the  plain- 
tiff would  guarantee  to  make  him  the  loan ;  that  the  plaintiff'  told  him 
to  sign  the  note,  which  would  be  held  in  the  plaintift''s  safe  until  the 
deal  was  closed;  that  if  it  was  not  closed,  the  note  would  be  returned 
to  the  defendant  and  the  policy  would  be  returned  to  the  plaintiff: 
that  the  policy  would  be  null  and  void  if  the  plaintiff  did  not  get  the 
loan  for  the  defendant,  and  that  both  of  them  would  be  taking  the  same 
chance.  If  these  statements  mean  anything,  they  plainly  import  a  con- 
dition which  was  to  be  performed  before  the  transaction,  witnessed 
by  the  delivery  of  the  note  to  the  plaintiff  and  the  delivery  of  the  poli- 
cies and  receipts  to  the  defendant,  was  to  be  regarded  as  consummated 
and  binding.  That  condition  was  the  procurement  of  the  loan  which, 
concededly,  was  never  made.  Giving  to  the  defendant's  story  a  fair, 
natural,  and  unstrained  interpretation,  we  have  a  case  in  which  there 
is  failure  of  the  precise  condition  which  must  determine  the  existence 
or  nonexistence  of  any  contract  between  him  and  the  plaintiff.  We  are 
not  unmindful  of  the  opposing  facts  and  antagonistic  inferences  which 
other  features  of  the  transaction  may  suggest.  These  are  not  proper 
subjects  for  present  discussion.  We  simply  emphasize  the  controlling 
circumstance  that,  if  the  defendant's  story  is  true,  there  is  no  binding 
contract  between  him  and  the  plaintiff,  and  the  issue  of  its  truth  or 
falsity  is  for  the  jury,  and  not  for  the  court. 

There  is  no  subtlety  or  ambiguity  in  the  law  of  the  subject ;  but  there 
is  difficulty  in  applying  it  to  some  cases  in  which  there  may  be  uncer- 
tainty as  to  the  effect  of  oral  testimony  upon  contracts  which  are  wholly 
or  partly  reduced  to  writing.    When  the  oral  testimony  goes  directly 


90  BILLS  AND    NOTES  AND   THEIR  REQUISITES 

to  the  question  whether  there  is  a  written  contract  or  not,  it  is  always 
competent;  but  when  the  effect  of  the  oral  testimony  is  to  establish 
the  existence  of  a  written  contract,  which  it  is  designed  to  contradict 
or  change  by  parol,  then  the  spoken  word  must  yield  to  the  written 
compact. 

There  are  many  decided  cases  upon  this  branch  of  the  law  both  in 
this  state  and  in  other  jurisdictions,  but  we  shall  refer  to  only  a  few, 
as  illustrating  the  line  of  cleavage  between  the  case  at  bar  and  the  case 
of  Jamestown  Business  College  Ass'n  v.  Allen,  172  N.  Y.  291,  64  N. 
E.  952,  92  Am.  St.  Rep.  740,  upon  which  the  respondent  relies  to  sup- 
port his  contentions.  In  Benton  v.  Martin,  52  N.  Y.  570,  this  court 
very  clearly  enunciated  the  rule  which  has  always  obtained  in  this  state : 
''Instruments  not  under  seal  may  be  delivered  to  the  one  to  whom  upon 
their  face  they  are  made  payable,  or  who  by  their  terms  is  entitled  to 
some  interest  or  benefit  under  them,  upon  conditions  the  observance  of 
which  is  essential  to  their  validity.  And  the  annexing  of  such  condi- 
tions to  the  delivery  is  not  an  oral  contradiction  of  the  written  obliga- 
tion, though  negotiable,  as  between  the  parties  to  it,  or  others  having 
notice.  It  needs  a  delivery  to  make  the  obligation  operative  at  all,  and 
the  effect  of  the  delivery  and  the  extent  of  the  operation  of  the  instru- 
ment may  be  limited  by  the  conditions  with  which  delivery  is  made. 
And  so  also,  as  between  the  original  parties  and  others  having  notice, 
the  want  of  consideration  may  be  shown."  Page  574.  This  quotation 
sums  up  the  whole  of  the  law  applicable  to  the  case  at  bar  in  its  present 
state,  and  outlines  comprehensively  the  rule  which  has  been  followed  in 
Bookstaver  v.  Jayne,  60  N.  Y.  146 ;  Grierson  v.  Mason,  60  N.  Y.  394 ; 
Reynolds  v.  Robinson,  110  N.  Y.  654,  18  N.  E.  127;  Schmittler  v.  Si- 
mon, 114  N.  Y.  176,  21  N.  E.  162,  11  Am.  St.  Rep.  621;  and  other 
cases,  under  a  variety  of  circumstances. 

The  case  of  Jamestown  Business  College  Ass'n  v.  Allen,  supra,  is  a 
salient  illustration  of  the  converse  of  this  rule.  There  the  promissory 
note  was  rendered  effective  and  complete  by  an  unconditional  delivery. 
The  payee  agreed  to  release  the  maker,  and  to  cancel  the  note,  upon  a 
future  contingency  which  might  or  might  not  arise.  That  was  clearly  a 
condition  subsequent,  which  brought  the  case  within  the  general  rule 
that  a  contract  reduced  to  writing,  and  complete  in  its  terms,  cannot  be 
varied  and  contradicted  by  oral  testimony.  Eighmie  v.  Taylor,  98  N. 
Y.  288;  Thomas  v.  Scutt,  127  N.  Y.  133,  27  N.  E.  961;  Stowell  v. 
Greenwich  Ins.  Co.,  163  N.  Y.  298,  57  N.  E.  480 ;  Mead  v.  Dunlevie, 
174  N.  Y.  108,  66  N.  E.  658.  Thus,  to  state  the  difference  most  con- 
cretely, the  case  at  bar  is  one  in  which  the  oral  testimony  tends  to  show 
that  the  writing  purporting  to  be  a  contract  is  in  fact  no  contract  at 
all ;  while  in  the  case  of  the  Jamestown  Business  College  the  oral  testi- 
mony was  in  direct  contradiction  of  the  written  contract,  as  to  the 
existence  and  validity  of  which  there  was  no  controversy. 

We  think  the  court  erred  in  excluding  the  evidence  offered  by  the 


DELIVERY  91 

defendant  to  show  what  took  phice  between  him  and  Marvin  at  the 
time  when  the  original  note  was  renewed  by  the  notes  in  suit.  It  needs 
no  argument  to  demonstrate  that,  if  it  was  competent  for  the  defendant 
to  show  under  what  conditions  he  dehvered  the  original  note,  he  must 
logically  be  permitted  to  show  that  the  renewal  notes  were  affected  by 
the  same  conditions.  Quite  aside  from  this,  there  is  enough  in  the 
record  to  make  it  a  question  for  the  jury  whether  Marvin  was  or  was 
not  the  alter  ego  of  the  plaintiff  in  the  dealings  with  the  defendant. 

As  there  must  be  another  trial,  we  have  eliminated  from  this  discus- 
sion everything  that  is  not  germane  to  the  questions  which  are  before 
us  on  this  appeal.  We  have  not  referred  to  the  defendant's  counter- 
claim, which  is  manifestly  inconsistent  with  his  defense,  or  to  the  evi- 
dence relating  to  his  asserted  possession  of  options  for  the  purchase 
of  the  brewery  stock.  These  and  various  other  features  of  the  case 
may  be  of  importance  in  determining  the  verdict  of  a  jury,  but  they 
cannot  affect  our  decision. 

The  judgment  should  be  reversed  and  a  new  trial  ordered. 

Judgment  reversed. 


92  ACCEPTANCE   OF  BILLS   OF  EXCHANGK 


.^/         ^V 


ACCEPTANCE  OF  BILLS  OF  EXCHANGE  ,   v^  ^ 
I.  Acceptance  According  to  Tenor  "^    - 


PETIT  V.  BENSON. 

(Court  of  King's  Bench,  1G97.     Comberbach,  452.) 

A  bill  was  drawn  upon  the  defendant,  who  accepts  it  by  indorsement 
in  this  manner:  "I  do  accept  this  bill  to  be  paid,  half  in  money  and 
half  in  bills."  AndJhe.^uestkLn  was  whether  there  could  be  a_^ualifi- 
cation  of  an  acceptance ;  for  it  was  alleged7  that  his  writing  upon  the 
bill  was  sufficient  to  charge  him  with  the  whole  sum.  But  'twas  proved 
by  divers  merchants,  that  the  custom  among  them  was  quite  otherwise, 
and  that  there  might  be  a  qualification  of  an  acceptance,  for  he  that 
may  refuse  the  bill  totally,  may  accept  it  in  part ;  but  he  to  whom  the 
bill  is  due  may  refuse  such  acceptance,  and  protest  it  so  as  to  charge 
the  first  drawer ;  and  tho'  there  be  an  acceptance,  yet  after  that  he  hath 
the  same  liberty  of  charging  the  first  drawer,  as  he  before  had. 


BOEHM  V.  GARCIAS. 
(Nisi  Prius,  before  Lord  Ellenborough,  C.  J.,  1S07.    1  Campb.  425,  note.) 

Action  on  a  bill  drawn  on  Lisbon,  "payable  in  effective  and  not  in 
vals  reals."  The  defendant  was  the  drawer  of  the  bill ;  and  the  ques- 
tion was,  whether  it  had  been  dishonored  for  nonacceptance.  The 
drawees  offered  to  accept  it,  payable  in  vals  denaros,  another  sort  of 
currency,  which  was  refused.  The  defendant  now  proposed  to  show 
that  vals  denaros  was  sufficient  to  answer  what  was  meant  by  effective. 
But, 

Per  Lord  EivLEnborough.  The  plaintiff  had  a  right  to  refuse  this 
acceptance.  The  drawee  of  a  bill  has  no  right  to  vary  the  acceptance 
from  the  terms  of  the  bill,  unless  they  be  unambiguously  and  unequiv- 
ocally the  same.  Therefore,  without  considering  whether  a  payment 
in  denaros  might  not  have  satisfied  the  term  "effective,"  an  acceptance 
to  pay  in  denaros  was  not  a  sufficient  acceptance  of  a  bill  drawn  pay- 
able in  effective.  The  drawees  ought  to  have  accepted  generally,  and 
an  action  being  brought  against  them  on  the  general  acceptance,  the^ 
question  would  properly  have  arisen  as  to  the  meaning  of  the  term. 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  %% 
42-45. 


WHO   MAY   ACCEPT  9 


11.  Who  May  Accept' 


o 


HEENAN  V.  NASH. 

(Supreme  Court  of  Minnesota,  1SG3.     8  Minn.  407  [Gil.  363],  83  Am.  Dec.  790.) 

Flandrau,  J.  Action  on  bill  of  exchange  against  acceptor.  On 
the  18th  day  of  September,  1858,  the  defendant,  Patrick  Nash,  and  one 
WilHam  B.  McGrorty  were  partners  under  the  name,  firm,  and  style  of 
"Nash  &  McGrorty."  On  that  day  Patrick  Murnane  drew  the  bill  in 
question  on  the  said  firm,  in  favor  of  William  Devine,  and  to  his  order, 
payable  in  one  month  from  date.  William  Devine  indorsed  the  bill  to 
the  plaintiff,  who,  on  the  25th  day  of  July,  1859,  presented  the  same  to 
Patrick  Nash,  who  accepted  it  by  writing  on  its  face  the  following 
words:  "Accjgje^lhis  25th  July,  18j2" 

The  statute^FtHis  state,  on  the  subject  of  acceptances,  is  as  follows : 
"No  person  within  this  territory  shall  be  charged  as  an  acceptor  on  a 
bill  of  exchange,  unless  his  acceptance  shall  be  in  writing,  signed  by 
himself  or  his  lawful"agentT*^  Piib.^St.  p.  375,  §  7. 
"AVGlvin  have  to' consider,  in  deciding  this  case,  two  questions  :  First, 
whether  the  acceptance  by  Nash  was  good  as  a  partnership  acceptance, 
and  binding  on  the  firm ;  and,  second,  whether  it  was  competent  for 
him  to  accept  the  bill  as  an  individual,  and  incur  a  liability  against  him- 
self alone.  If  the  acceptance  was  binding  upon  the  firm,  the  action  is 
well  brought  against  one  of  the  members.  Pub.  St.  p.  536,  §  38,  pro- 
vides, that  "any  one  of  the  joint  associates  may  also  be  sued  for  the 
obligations  of  all."  If  the  liability  was  individual,  the  acceptor  was,  of 
course,  the  proper  defendant. 

In  the  case  of  Mason  v.  Rumsey,  1  Camp.  384,  it  was  held  that  an 
acceptance  by  one  member  of  a  firm  in  his  own  name  would  bind  the 
firm  when  the  bill  was  dra\vrron  thg  firm'.  The  same  was  again  held  in 
Wells  V.  MasTcrman,  2  Esp.  731.  This  doctrine  seems  to  have  been 
adopted  in  Collyer  on  Partnership,  §  410,  and  in  Byles  on  Bills,  144. 
on  the  authority  of  these  cases,  and  some  others  there  collected.  In  the 
case  of  Dougal  v.  Cowles,  5  Day  (Conn.)  511,  the  same  is  again  laid 
down  on  the  authority  of  the  case  of  Mason  v.  Rumsey.  There  are 
other  cases  that  hold  an  acceptance  by  a  member  of  a  firm,  in  a  name 
other  than  the  firm  name,  to  raise  a  question  of  fact,  tobe  left  to  the 
jury,  whether  the  name  lised  substantially  describes  the  firm,  or  wheth- 
er it  so  far  varies  that  the  acceptor  must  be  taken  to  have  made  it  on 
his  own  account.  See  Faith  v.  Richmond,  11  Adol.  &  E.  339,  39  Eng. 
Com.  Law  Rep.  113;  Drake  v.  Elwyn,  1  Caines  (N.  Y.)  184. 

Acceptances  could  formerly  be  made  by  parol,  which  was  the  law 

2  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §  46. 


94  ACCEPTANCE   OF   BILLS   OF   EXCHANGE 

ill  Connecticut  at  the  time  of  the  decision  cited  from  5  Day,  and  that 
point  is  expressly  made  by  the  court  in  deciding  the  case.  The  same 
may  be  said  of  the  case  of  Mason  v.  Rumsey,  which  was  decided  before 
the  statute  of  1  &  2  Geo.  IV,  c.  78,  §  2,  wliich  provided  that  acceptanceSj^ 
to  bevahd,  must  be  in  writing.  Even  after  this  statute  the  Enghsh 
courts  have  held  that  the  word  "Accepted,"  written  on  the  bill  by  one 
having  authority,  is  sufficient  to  bind  the  drawees.  The  only  principle 
upon  v^-hich  the  courts  have  held  that  an  acceptance  by  one  partner  in 
his  own  name  will  bind  the  firm  is  the  implied  authority  which  each 
member  has  to  act  for  the  whole,  and  when  the  bill  is  drawn  upon  the 
firm,  and  accepted  by  one,  they  hold  that  he  intended  to  accept  it  as 
drawn. 

I  find  one  English  case,  decided  in  the  Court  of  Exchequer  in  1841, 
which  holds  a  doctrine  much  more  in  accordance  with  our  views  of 
the  principles  which  should  govern  the  question.  In  Kirk  v.  Blurton, 
9  Mees.  &  W.  283,  the  defendants  were  partners  under  the  name  of 
"John  Blurton."  One  of  the  firm  drew  a  bill  in  the  name  of  "John 
Blurton  &  Co."  The  firm  was  sued  upon  it,  and  the  partner  who  did 
not  draw  the  bill  defended.  Faith  v.  Richmond,  Mason  v.  Rumsey,  and 
other  cases,  were  cited.  Alderson,  B.,  in  delivering  the  opinion,  says : 
"The  court  do  not  entertain  any  doubt  as  to  the  principles  of  law  ap- 
plicable to  this  case.  One  partner  can  bind  his  copartner  only  to  the 
extent  of  the  authority  which  is  given  "to  partners  generally,  to  enable 
them  to  carry  on  the  partnership  business,"  which  authority  he  says, 
in  another  part  of  the  opinion,  is  "to  bind  the  firm  in  the  name  of  the 
partnership,  and  in  that  only." 

Since  the  passage  of  our  statute  on  the  subject  of  acceptances,  no  in- 
ferences can  be  indulged  in.  To  make  an  acceptance  valid,  it  must  be 
in  writing,  signed  by  the  acceptor  or  his  lawful  agent.  Mr,  Nash,  as  a 
partner  of  the  firm  of  Nash  &  McGrorty,  had  a  right  to  accept  the 
bill  for  the  firm  by  virtue  of  his  general  powers  as  a  partner,  but  this 
power  of  a  partner  is  to  bind  the  firm  by  the  use  of  the  firm  name,  and 
in  no  other  way.  This  he  did  not  do,  and  we  are  clear  that  the  accept- 
ance cannot  be  held  to  bind  the  firm. 

We  are  next  to  consider  whether  the  defendant  can  be  held  as  ac- 
ceptor individually.  It  is  a  well-settled  rule  of  commercial  law  that 
no  one  can  accept  a  bill  but  the  person  upon  whom  it  is  drawn,  except 
for  honor.  Polhill  v.  Walter,  3  Barn.  &  Adol.  114;  Davis  v.  Clark,  1 
Car.  &  K.  177;  May  v.  Kelly,  27  Ala.  497.  If  a  bill  is  drawn  upon  A., 
and  B.  accepts  it,  the  act  is  merely  voluntary,  without  any  considera- 
tion, and  creates  no  liability  whatever  in  the  law.  It  is  allowed,  for  the 
convenience  of  commerce,  that  a  person  other  than  the  drawee  may, 
after  presentation,  refusal,  and  protest,  accept,  forthehonor  _of  the 
drawer,  or  any  of  the  indorsers,  or  of  all  the  parties  as  he  may  see  fit ; 
butlhis  is  a  well-understood  transaction,  and  is  done  supra  protest,  and 
under  certain  well-settled  forms  and  ceremonies.  There  is  no  pretense 
tfiaTMr.  Nash  was  such  an  acceptor  oi  the  bill  in  question. 


IMPLIED  ACCEPTANCE  yj 

Where  a  bill  is  drawn  upon  several  individuals,  an  acceptance  by 
any  one  of  them  is  binding  upon  him,  although  the  bill  may  be  treated, 
and  should  be,  as  dishonored,  if  not  accepted  by  all  the  drawees,  be- 
cause the  holder  is  entitled  to  the  acceptance  of  them  all ;  but  in  such 
case  a  liability  accrues  against  the  party  accepting,  because  he  is  a 
drawee,  as  much  as  if  the  bill  had  been  drawn  upon  him  alone.  Where, 
however,  the  bill  is  drawn  upon  a  firm,  any  member  of  tlie  partnership, 
in  his  individual  capacity,  is  quite  as  much  a^  stranger  to  the  same  as  a 
third_£erson.  He  is  only  connected  with  the  bill  through  his  member- 
ship  of  the  firm,  which  is  drawee,  and  in  virtue  of  such  membership 
he  has  power  to  use  the  firm  name  in  accepting  it.  If  he  accepts  it  in 
his  individual  name  he  docs  not  bind  the_firm,  and  there  is  no  consTd^ 
eration  torTiis  act.  It  is  the  case  of  a  bill  drawn  on  one  party  and  ac- 
cepted by  another. 

The  court,  in  deciding  the  case  below,  after  stating  that,  "if  one  of 


several  parties  to  whom  a  bill  is  addressed  accepts  the  same,  such  ac- 
ceptance will  bind  him,"  adds,  in  another  part  of  the  opinion:  "It  can 
hardly  be  said  that  one  of  two  or  more  partners,  upon  whom  a  bill  is 
drawn,  is  so  far  a  stranger  to  the  bill  that  an  acceptance  will  not  bind 
him.  If  one  of  several  persons,  between  whom  no  business  relations 
exist,  can  bind  himself,  by  accepting  a  bill  drawn  on  all,  it  is  not  per- 
ceived why  any  one  of  several  partners  may  not  do  the  like."  We  have 
endeavored  to  show  the  error  of  this  position  above.  In  the  case  of  a 
bill  drawn  upon  several  individuals,  "between  whom  no  business  rela- 
tions exist,"  each  is  a  drawee  in  his  individual  capacity,  and  competent 
as  such  to  accept;  but,  in  the  case  of  a  bill  drawn  upon  a  firm,  the  as- 
sociation, and  not  the  individual  members  thereof,  is  the  drawee,  and 
an  acceptance  by  one  member  in  his  own  name  is  not  an  acceptance  by 
the  drawee.  The  complaint  is  demurrable,  and  the  demurrer  should 
have  been  sustained. 

Order  overruling  demurrer  reversed. 


III.  Implied  Acceptance 


WESTBERG  v.  CHICAGO  LUMBER  &  COAL  CO. 

(Supreme  Court  of  Wisconsin,  1903.     117  Wis.  5S9,  94  N.  W.  572.) 

Action  upon  a  [non]  negotiable  bill  of  exchange  drawn  upon  the 
defendant  in  favor  of  the  plaintiff  by  the  Lien-Neally  Lumber  Com- 
pany for  $585,  alleged  to  have  been  accepted  by  the  defendant.  The 
answer  was  a  general  denial.  The  evidence  disclosed  that  the  Licn- 
NealT)'  Lumber  Company,  sawmill  owners,  had  purchased   from  the 

8  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  IM.)  §  .".0. 


96  ACCEPTANCE   OF  BILLS   OF   EXCHANGE 

plaintiff  certain  logs  or  stumpage  amounting  to  $585 ;  that  they  had 
sold  product  of  their  mill,  including  that  of  these  logs,  to  the  defend- 
ant, and  were  in  the  habit  of  making  orders  and  drafts  upon  the  latter 
for  money  to  pay  their  various  bills.  About  April  21st,  upon  plaintiff's 
application  for  payment,  they  made  out  an  order  upon  the  defendant 
substantially  as  follows :  "To  Chicago  Lumber  &  Coal  Co. :  Please 
pay  to  John  Westberg  five  hundred  eighty-five  (585)  dollars  for  logs 
dehvered  at  Bibon  as  per  contract.  [Signed]  Lien-Neally  Lumber 
Co." 

They  had  plaintiff  write  his  name  on  the  back  of  it,  and  then  Mr, 
Lieirniaile1Ithat^der,m  connection  with  other  orders  and  time-checks 
aggregating  some  $2,000,  to  the  defendant,  accompanied  by  a  letter 
the  contents  of  which  are  not  disclosed.  The  defendant's  representa- 
tive denied  any  memory  of  the  order  or  draft  in  favor  of  the  plaintiff. 
It  was  proved,  however,  that  he  sent  to  the  Lien-Neally  Company  the 
money  for  the  other  orders  inclosed  in  the  same  letter.  Plaintiff  never 
heard  from  the  defendant,  but  made  repeated  applications  to  the  Lien- 
Neally  Company  for  payment,  and  was  put  off  from  time  to  time  by 
promises,  until  finally  they  refused  to  pay,  saying  he  must  look  to  the 
defendant.  At  that  time  the  defendant  had  paid  drafts  of  that  com- 
pany to  more  than  the  amount  of  the  indebtedness  to  it,  and  refused 
to  pay  this.    The  plaintiff's  draft  never  was  returned  to  him. 

On  the  trial,  a  special  verdict  being  requested,  the  court  submitted 
but  one  question,  namely,  whether  the  defendant  received  thisdraft  on 
or  before  April  23d,  which  was  answered  in  the  affirmative,  and  there- 
upon the  court  found  thaTlhe  plainfiff  dehvered  that  order  for  accept- 
ance on  or  before  April  23d';  thatjt  was~received  by  the  defendant,  and 
was  by  it  destroyed,  and  that  the  defendant  is  indebted  to  the  plaintiff 
in  the  amount  thereof,  with  intei'est ;  the  last  conclusion  being  predi- 
cated upon  the  theory  that  the  reJ;ention  and  destruction  of  the  order 
constituted  an  acceptance.  From  judgment  in'  accordance  with  that 
finding  the  defendant  appeals. 

DoDGii,  J.  (after  stating  the  facts  as  above).  Rendition  of  judg- 
ment in  favor  of  plaintiff  in  this  case  can  be  justified  only  on  one  of 
two  theories — either  that  in  law  an  implication  of  acceptance  results 
from  .the  mere  physical  receipt  of  a  bill  of  exchange  by  the  drawee, 
followed  by  silence,  or  that  all  other  facts  essential  to  such  implication 
were  undisputed,  or  were  supported  by  inference  from  undisputed  facts 
so  clear  and  unavoidable  that  no  reasonable  mind  could  draw  any  other. 
Appellant  had  the  right  to  have  each  controverted  question  of  fact 
decided  by  the  jury. 

Upon  the  question  of  law  as  to  when  implied  or  constructive  accept- 
ance takes  place,  the  authorities  are  reasonably  clear  and  approximately 
unanimous.  Upon  delivery  for  acceptance,  the  drawee  is  not  bound 
to  act  at  once.  He  has  a  right  to  a  reasonable  time — usually  24  hours 
— to  ascertain  the  state  of  accounts  between  himself  and  the  drawer, 


IMPLIED   ACCEPTANCE  DT 

and  until  expiration  of  that  time  the  holder  has  no  right  to  demand  an 
answer,  nor,  without  categorical  answer,  to  deem  the  bill  either  ac- 
cepted  or  diMionored;  not  accepted,  because  of  tiic  right  of  drawee  to 
consider  before  fie  binds  himself ;  not  dishonored,  because  both  drawer 
and  drawee  have  the  right  that  their  paper  be  not  discredited  during 
such  period  of  investigation.  After  the  expiration  of  that  reasonable 
time  the  holder  has  a  right  to  know  whether  the  drawee  assumes  lia- 
bilit}^_toJiim  by  accepting,  and,  if  not.'he'has  a  right  to  return  of  the 
document,  so  that  he  may  protest  or  otherwise  proceed  to  preserve  his 
rights  against  the  drawer.  The  consensus  of  authority  is,  however,  that 
the  duty  rests  on  the  holder  to  demand  either  acceptance  or  return  of 
the  bill,  and  that  mere  inaction  on  the  part  of  the  drawee  has  no  effect. 
After  the  expiration  of  this  time  for  investigation,  the  drawee  may, 
by  retention  of  the  bill,  accompanied  by  other  circumstances,  become 
bound  as  an  acceptor ;   not',  however,  by  mere  retention. 


•There  seem  to  be  two  phases  of  conduct  recognized  by  the  authori- 
ties as  charging  the  drawee — one  purely  contractual,  as  where  the  re- 
tention is  accompanied  by  such  cusluni,  promise,  or  notification  as  to 
warrant  the  holder,  to  the  knowledge  of  the  drawee,  in  understanding 
that  the  retention  declares  acceptance ;  the  other,  where  the  conduct 
of  Jhe  drawee  is  substantially  tortious,  and  amounts  to  a  conversion  oT 
the  bill.  This  Is  the  phase  of  conduct  which  our  negotiable  instrument 
statute  (section  16S0k,  c.  356,  p.  735,  Laws  of  1899)  has  undertaken 
to  define  and  limit  as  refusal  (not  mere  neglect)  to  return  the  bill,  or 
destruction  of  it ;  reiterating  the  common-law  rule  that  mere  retention 
of  the  bill  is  not  acceptance.  Overman  v.  Hoboken  Bank,  31  N.  J. 
Law,"563rMcEoweh  &  Co.  v.  Scott,  49  Vt.  376;  Colo.  Nat.  Bank  v. 
Boettcher,  5  Colo.  185,  40  Am.  Rep.  142 ;  Dickinson  v.  Marsh,  57  Mo. 
App.  566;  Dunavan  v.  Flynn,  118  Mass.  537;  Holbrook  v.  Payne. 
151  Mass.  383,  24  N.  E.  210,  21  Am.  St.  Rep.  456;  Gates  v.  Eno,  4 
Hun  (N.  Y.)  96;  Matteson  v.  Moulton,  11  Hun  (N.  Y.)  268,  affirmed 
79  N.  Y.  627;  Hall  v.  Steel,  68  111.  231 ;  First  Nat.  Bank  v.  McAIichael. 
106  Pa.  460,  51  Am.  Rep.  529;  Koch  v.  Howell,  6  Watts  &  S.  (Pa.) 
350;  Short  v.  Blount,  99  N.  C.  49,  5  S.  E.  190;  Boyce  v.  Edwards,  4 
Pet.  Ill,  7  L.  Ed.  799;  Bank  of  the  Republic  v.  Millard,  10  Wall.  152, 
19  L.  Ed.  897;   1  Daniel,  Neg.  Inst.  §§  499,  500. 

The  doctrine  of  constructive  acceptance  is  based  on  the  general  prin- 
ciples of  estoppel.  If  the  conduct  of  the  drawee  will  prejudice  the  ex- 
isting rights  of  the  holder,  unless  it  means  acceptance,  and  the  drawee 
has  knowledge  of  such  fact,  he  is  estopped  to  deny  the  only  purpose 
which  could  render  his  conduct  innocuous ;  namely,  acceptance  of  the 
bill.  This  underlying  principle  suggests  the  reasons  for  many  of  the 
limitations  upon  the  implication  of  acceptance  from  conduct;  as,  for 
example,  that  such  implication  arises  only  when  the  bill  is  presented 
for  acceptance,  and  that  no  one  but  the  holder  (payee  or  indorsee)  can 
Moore  Cases  B.&  N. — 7 


98  ACCEPTANCE   OF   BILLS   OF   EXCHANGE 

make  such  technical  presentment.  2  Randolph,  Com.  Paper,  §§  568, 
572;  1  Daniel,  Neg.  Inst.  §§  455,  1681,  1682;  Neg.  Inst.  Law  Wis. 
1899,  p.  738,  c.  356.  Only  when  the  drawee  knows  that  acceptance  is 
expected  would  he  suppose  that  his  conduct  can  lead  to  a  belief  that 
he  does  accept.  Only  when  the  presentment  is  by  the  holder,  whose 
conduct  and  rights  must  be  affected  by  acceptance  or  refusal,  is  the 
drawee  charged  by  the  strict  rules  of  the  law  merchant  with  notice  that 
his  conduct  may  so  injuriously  affect  the  person  delivering  the  bill  to 
him. 

In  the  light  of  these  rules  of  law  it  is  at  once  apparent  that  the 
vt'rdict  alone  does  not  present  sufficient  facts  to  charge  defendant  with 
constructi^•e  acceptance.  Not  only  must  he  have  received  the  bjll,  as 
the  jury  found,  but  he  must  knowingly  have  received  it  fromTtie  payee 
or  his  authorized  agent,  and  for  acceptance ;  and  even  then  there  must 
have  been  something  more  than  mere  retention — either  destruction  or 
refusal  to  return  tojthe  holder,  if  within  the  negotiable  instrument  staP" 
ute,  or  so'me  circumstances,  contractual  or  tortious,  to  arouse  estoppel, 
if^by  reason  of  nonnegotiability,  this  instrument  is  governed  only  by" 
the  common  Taw.  We  must,  therefore,  turn  to  the  evidence  to  ascertain 
whether  all  these  necessary  additional  facts  were  established  beyond 
controversy.  True,  the  court  filed  so-called  findings  of  fact  declaring 
some  of  them  to  exist,  but,  as  appellant  claimed  that  the  fact  of  ac- 
ceptance should  be  submitted  to  the  jury,  it  did  not  consent  that  the 
court  might  assume  to  decide  either  the  facts  or  the  inferences  there- 
from, unless  free  from  controversy. 

The  only  evidence  of  the  manner  and  purpose  of  the  sending  of  this 
draft  is  that  the  drawer  sent  it  in  the  same  inclosure  with  numerous 
other  documents  similar  in  form,  with  which  plaintiff  had  no  connec- 
tion. The  contents  of  the  accompanying  letter  are  not  disclosed,  but 
it  is  reasonably  clear  that  the  other  orders  were  not  sent  for  acceptance 
on  behalf  of  the  payees  therein,  but  merely  as  vouchers  between  the 
drawer  and  drawee ;  for,  evidently,  as  expected,  the  latter  sent  money 
in  response  thereto  direct  to  the  drawer.  The  plaintiff's  order  or  draft, 
having  no  time 'of  payment  expressed,  was  payable  on  demand,  and 
did  not  need  to  be  presented  for  acceptance,  and  therefore  did  not  of 
itself  suggest  any  demand  for  such  action.  1  Randolph,  Com.  Paper, 
§  119;  1  Daniel,  Neg.  Inst.  §  454.  The  witness  Lien  testified,  "1  mailed 
it  in  behalf  of  the  Lien-Neally  Lumber  Co."  Plaintiff  said:  'T  didn't 
mail  it  myself.  Lien  said  he  would  mail  it.  I  left  it  to  him."  And 
again  :  "I  was  expecting  money  on  this  draft.  Mr.  Lien  said  he  would 
send  the  money  down  to  me." 

This  is  the  substance  of  all  the  evidence  as  to  the  circumstances 
under  which  this  paper  came  to  the  hands  of  the  defendant.  We  need 
not  say  more  than  that,  instead  of  conclusively  establishing, .as  the 
jourt  found,  that  "the  plaintiff  delivered  the  said  order  for  acceptance 
^o  the  defendant,"  it  quite  as  much  tends  to  show  the  contrary,  namely, 


IMPLIED    ACCEPTANCE  90 

that  the  drawer,  with  consent  of  plaintiff,  sent  it  as,  a^ voucher  for 
money  exp"ected  to  be  remiTfcd  lu  that  corporation,  and  by  it  paid  over 
to  plaintiff.  There  is  no  particle  of  evidence  to  establish  existence  of 
aiiy  communication  or  circumstance  which  could  suggest  to  defendant 
that  plaintiff  sent  it  or  authorized  its  sending,  that  any  acceptance  was 
demanded  or  expected,  or  that  plaintiff's  relations  vyith  the  drawer 
would  be  afTectcd  by  silence. 

If,  however,  both  of  these  questions  could  be  answered  in  the  af- 
firmative, there  would  still  remain  the  question  of  fact  whether  defend- 
ant's conduct  was  such  as  to  warrant  inference  or  implication  of  ac- 
ceptance. There  is  no  direct  evidence  of  anything  except  long-contin- 
ued retention  of  the  draft,  and  no  evidence  that  any  demand  was  ever 
made,  either  for  decision  as  to  acceptance  or  for  return.  The  court 
sought  tofneet  this  question  by  its  finding  that  defendant  destroyed  the 
draft.  Of  this  thereis  no  dircvl  |  roof,  the  sole  evidence  on  the  subject 
being  that  of  defendant's  agent  that  he  had  no  recollection  about  it,  and. 
did  not  know  whether  or  not  it  was  among  papers  in  defendant's  Chica- 
go office.  Whether  this  might  have  warranted  the  jury  in  so  doing,  it 
certainly  was  not  so  wholly  inconsistent  with  any  other  as  to  require 
the  court  to  raise  the  inference  of  destruction  as  matter  of  law. 

Hence  we  must  conclude  that  there  were  at  least  three  questions  of 
fact  on  which  the  jury  were  not  permitted  to  decide,  as  to  which  the 
evidence  and  inferences  were  not  beyond  controversy,  at  least  in  fa- 
vor of  plaintiff.  Whether  there  was  any  evidence  to  support  such  a 
decision  we  need  not  decide,  for  there  was  no  motion,  after  verdict, 
for  judgment  in  defendant's  favor.  A  new  trial  must,  therefore,  be 
directed. 

As  a  guide  to  the  court  and  parties  upon  such  new  trial  it  seems  im- 
portant that  we  declare  whether  the  instrument  in  suit  is  within  the 
purview  and  control  of  our  negotiable  instrument  law,  above  cited. 
Whether  such  paper  continues  to  be  a  bill  of  exchange  in  pursuance 
of  our  earlier  decisions  (Mehlberg  v.  Tisher,  24  Wis.  607 ;  Schierl  v. 
Baumel,  75  Wis.  69,  43  N.  W.  724),  it  certainly  is  not  a  negotiable 
bill  within  the  definition  of  section  1680,  Rev.  St.  1898,  as  amended  by 
chapter  356,  p.  733,  of  the  Laws  of  1899,  which  requires  that  such  an 
instrument  shall  be  payable  to  order  or  bearer.  It  seems  clear  from  the 
title  that  the  codifying  law  of  1899  is  intended  to  regulate  only  negotia- 
ble instruments.  Selover,  Neg.  Inst.  Laws,  §  2.  It  therefore  does  not 
atYect  or  control  the  rights  of  the  parties  upon  this  paper. 
Judgment  reversed,  and  cause  remanded  for  a  new  trial. 


100  ACCEPTANCE   OF   BILLS   OF   EXCHANGE 


IV.  Acceptance  on  Separate  Paper  * 


COOLIDGE  et  al.  v.  PAYSON  et  al. 
(Supreme  Court  of  the  United  States,  1817.     2  Wheat.  66,  4  L.  Ed.  185.) 

Marshall,  C.  J.,  delivered  the  opinion  of  the  court. 

This  suit  was  instituted  by  Payson  &  Co.,  as  indorsers  of  a  bill  of 
exchange,  drawn  by  Cornthwaite  &  Cary,  payable  to  the  order  of  John 
Randall,  against  Coolidge  &  Co.  as  the  acceptors. 

At  the  trial  the  holders  of  the  bill,  on  which  the  name  of  John  Ran- 
dall was  indorsed,  offered,  for  the  purpose  of  proving  the  indorsement, 
an  affidavit  made  by  one  of  the  defendants  in  the  cause,  in  order  to 
obtain  a  continuance,  in  which  he  referred  to  the  bill  in  terms  which, 
they  supposed,  implied  a  knowledge  on  his  part  that  the  plaintiffs  were 
the  rightful  holders.  The  defendants  objected  to  the  bill's  going  to 
the  jury  without  further  proof  of  the  indorsement ;  but  the  court  deter- 
mined that  it  should  go  with  the  affidavit  to  the  jury,  who  might  be  at 
liberty  to  infer  from  thence  that  the  indorsement  was  made  by  Ran- 
dall. To  this  opinion  the  counsel  for  the  defendants  in  the  Circuit 
Court  excepted,  and  this  court  is  divided  on  the  question  whether  the 
exception  ought  to  be  sustained. 

On  the  trial  it  appeared  that  Coolidge  &  Co.  held  the  proceeds  of 
part  of  the  cargo  of  the  Hiram,  claimed  by  Cornthwaite  &  Cary,  which 
had  been  captured  and  libeled  as  lawful  prize.  The  cargo  had  been  ac- 
quitted in  the  District  and  Circuit  Courts,  but  from  the  sentence  of 
acquittal  the  captors  had  appealed  to  this  court.  Pending  the  appeal 
Cornthwaite  &  Co.  transmitted  to  Coolidge  &  Co.  a  bond  of  indemnity, 
executed  at  Baltimore  with  scrolls  in  the  place  of  seals,  and  drew  on 
them  for  $2,700.  This  bill  was  also  payable  to  the  order  of  Randall, 
and  indorsed  by  him  to  Payson  &  Co.  It  was  presented  to  Coolidge 
&  Co.  and  protested  for  nonacceptance.  After  its  protest  Coolidge  & 
Co.  wrote  to  Cornthwaite  &  Cary  a  letter,  in  which,  after  acknowledg- 
ing the  receipt  of  a  letter  from  them,  with  the  bond  of  indemnity,  they 
say :  "This  bond,  conformably  to  our  laws,  is  not  executed  as  it  ought 
to  be  ;  but  it  may  be  otherwise  in  your  state.  It  will  therefore  be  neces- 
sary to  satisfy  us  that  the  scroll  is  usual  and  legal  with  you  instead  of  a 
seal.  We  notice  no  seal  to  any  of  the  signatures."  "We  shall  write  our 
friend  Williams  by  this  mail,  and  will  state  to  him  our  ideas  respecting 
the  bond,  which  he  will  probably  determine.  If  Mr.  W.  feels  satisfied 
on  this  point,  he  will  inform  you,  and  in  that  case  your  draft  for  $2,000 
will  be  honored." 

4  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
51,  52. 


ACCEPTANCE  ON  SEPARATE  PAPER  101 

On  the  same  day  CooHdge  &  Co.  addressed  a  letter  to  Mr.  Wil- 
liams, in  which,  after  referring  to  him  the  question  respecting  the  legal 
obligation  of  the  scroll,  they  say:  "You  know  the  object  of  the  bond, 
and,  of  course,  see  the  propriety  of  our  having  one  not  only  legal,  but 
signed  by  sureties  of  unquestionable  responsibility,  respecting  wjiich, 
we  shall  wholly  rely  on  your  judgment.  You  mention  the  last  surety 
as  being  responsible.    What  think  you  of  the  others?" 

In  his  answer  to  this  letter,  Williams  says :  "I  am  assured  that  the 
bond  transmitted  in  my  last  is  sufficient  for  the  purpose  for  which  it 
was  given,  provided  the  parties  possess  the  means;  and  of  the  last 
signer,  I  have  no  hesitation  in  expressing  my  firm  belief  of  his  bemg 
able  to  meet  the  whole  amount  himself.  Of  the  principals  I  cannot 
speak  with  so  much  confidence,  not  being  well  acquainted  with  their 
resources.  Under  all  circumstances,  I  should  not  feel  inclined  to  with- 
hold from  them  any  portion  of  the  funds  for  which  the  bond  was 
given." 

On  the  day  on  which  this  letter  was  written,  Cornthwaite  &  Gary 
called  on  Williams,  to  inquire  whether  he  had  satisfied  Coolidge  &  Co. 
respecting  the  bond.  Williams  stated  the  substance  of  the  letter  he 
had  written,  and  read  to  him  a  part  of  it.  One  of  the  firm  of  Pay- 
son  &  Co.  also  called  on  him  to  make  the  same  inquiry,  to  whom  he 
gave  the  same  information,  and  also  read  from  his  letter  book  the  letter 
he  had  written. 

Two  days  after  this,  the  bill  in  the  declaration  mentioned  was  drawn 
by  Cornthwaite  &  Cary,  and  paid  to  Payson  &  Co.  in  part  of  the  pro- 
tested bill  of  $2,700,  by  whom  it  was  presented  to  Coolidge  &  Co.,  who 
refused  to  accept  it,  on  which  it  w^as  protested,  and  this  action  brought 
by  the  holders. 

On  this  testimony,  the  counsel  for  the  defendants  insisted  that  the 
plaintiffs  were  not  entitled  to  a  verdict;  but  the  court  instructed  the 
jury  that  if  they  were  satisfied  that  Williams,  on  the  application  of 
the  plaintiffs,  made  after  seeing  the  letter  from  Coolidge  &  Co.  to 
Cornthwaite  &  Cary,  did  declare  that  he  was  satisfied  with  the  bond 
referred  to  in  that  letter,  as  well  with  respect  to  its  execution,  as  to 
the  sufficiency  of  the  obligors  to  pay  the  same,  and  that  the  plaintiffs, 
upon  the  faith  and  credit  of  the  said  declaration,  and  also  of  the  letter 
to  Cornthwaite  &  Cary,  and  without  having  seen  or  known  the  contents 
of  the  letter  from  Coolidge  &  Co.  to  Williams,  did  receive  and  take  the 
bill  in  the  declaration  mentioned,  they  were  entitled  to  recover  on  the 
present  action,  and  that  it  was  no  legal  objection  to  such  recovery  that 
the  promise  to  accept  the  present  bill  was  made  to  the  drawers  thereof, 
previous  to  the  existence  of  such  bill,  or  that  the  bill  had  been  taken 
in  part  payment  of  a  pre-existing  debt,  or  that  the  said  Williams,  in 
making  the  declarations  aforesaid,  did  exceed  the  private  instructions 
given  to  him  by  Coolidge  &  Co.,  in  their  letter  to  him. 

To  this  charge  the  defendants  excepted.    A  verdict  was  given  for 


102  ACCEPTANCE    OF   BILLS    OF    EXCHANGE 

the  plaintiffs,  and  judgment  rendered  thereon,  which  judgment  is  now 
before  this  court  on  a  writ  of  error. 

The  letter  from  Coolidge  &  Co.  to  Cornthwaite  &  Gary  contains  no 
reference  to  their  letter  to  Williams  which  might  suggest  the  necessity 
of  seeing  that  letter,  or  of  obtaining  information  respecting  its  contents. 
They  refer  Cornthwaite  &  Cary  to  Williams,  not  for  the  instructions 
they  had  given  him,  but  for  his  judgment  and  decision  on  the  bond  of 
indemnity.  Under  such  circumstances,  neither  the  drawers  nor  the 
holders  of  the  bill  could  be  required  to  know,  or  could  be  affected  by, 
the  private  instructions  given  to  Williams.  It  was  enough  for  them, 
after  seeing  the  letter  from  Coolidge  &  Co.  to  Cornthwaite  &  Cary,  to 
know  that  Williams  was  satisfied  with  the  execution  of  the  bond  and 
the  sufiiciency  of  the  obligors,  and  had  informed  Coolidge  &  Co.  that  he 
was  so  satisfied. 

This  difficulty  being  removed,  the  question  of  law  which  arises  from 
the  charge  given  by  the  court  to  the  jury  is  this:  Does  a  promise  to 
accept  a  bill  amount  to  an  acceptance  to  a  person  who  has  taken  it  on 
the  credit  of  that  promise,  although  the  promise  was  made  before  the 
existence  of  the  bill,  and  although  it  is  drawn  in  favour  of  a  person 
who  takes  it  for  a  pre-existing  debt? 

In  the  case  of  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins,  3  Burr. 
1663,  the  credit  on  which  the  bill  was  drawn  was  given  before  the 
promise  to  accept  was  made,  and  the  promise  was  made  previous  to 
the  existence  of  the  bill.  Yet  in  that  case,  after  two  arguments,  and 
much  consideration,  the  Court  of  King's  Bench  (all  the  judges  being 
present  and  concurring  in  opinion)  considered  the  promise  to  accept 
as  an  acceptance. 

Between  this  case,  and  that  under  the  consideration  of  the  court, 
no  essential  distinction  is  perceived.  But  it  is  contended  that  the  au- 
thority of  the  case  of  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins  is  im- 
paired by  subsequent  decisions. 

In  the  case  of  Pierson  v.  Dunlop  et  al.,  Cowp.  571,  the  bill  was  drawn 
and  presented  before  the  conditional  promise  was  made  on  which  the 
suit  was  instituted.  Although,  in  that  case,  the  holder  of  the  bill  re- 
covered as  on  an  acceptance,  it  is  supposed  that  the  principles  laid  down 
by  Lord  Mansfield,  in  delivering  his  opinion,  contradict  those  laid  down 
in  Pillans  &  Bros.  v.  Van  Mierop  &  Hopkins.  His  Lordship  observes : 
"It  has  been  truly  said,  as  a  general  rule,  that  the  mere  answer  of  a 
merchant  to  the  drawer  of  a  bill,  saying,  "He  will  duly  honor  it,"  is 
no  acceptance,  unless  accompanied  with  circumstances  which  may  in- 
duce a  third  person  to  take  the  bill  by  indorsement;  but  if  there  are 
any  such  circumstances,  it  may  amount  to  an  acceptance,  though  the 
answer  be  contained  in  a  letter  to  the  drawer." 

If  the  case  of  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins  had  been 
understood  to  lay  down  the  broad  principle  that  a  naked  promise  to 
accept  amounts  to  an  acceptance,  the  case  of  Pierson  v.  Dunlop  cer- 


ACCEPTANCE    ON    SEl'AUATE    PAPER 


103 


tainly  narrows  that  principle  so  far  as  to  require  additional  circum- 
stances proving  that  the  person  on  whom  the  bill  was  drawn  was  bound 
by  his  promise,  either  because  he  had  funds  of  the  drawer  in  his  hands, 
or  because  his  letter  had  given  credit  to  the  bill,  and  induced  a  tiiird 
person  to  take  it. 

It  has  been  argued  that  those  circumstances  to  which  Lord  Mansfield 
alludes  must  be  apparent  on  the  face  of  the  letter.  But  the  court  can 
perceive  no  reason  for  this  opinion.  It  is  neither  warranted  by  the 
words  of  Lord  Mansfield,  nor  by  the  circumstances  of  the  case  in  which 
he  used  them.  "The  mere  answer  of  a  merchant  to  the  drawer  of  a  bill, 
saying  he  will  duly  honor  it,  is  no  acceptance  unless  accompanied  with 
circumstances,"  etc.  The  answer  must  be  "accompanied  with  circum- 
stances" ;  but  it  is  not  said  that  the  answer  must  contain  those  circum- 
stances. In  the  case  of  Pierson  v.  Dunlop,  the  answer  did  not  con- 
tain those  circumstances.  They  were  not  found  in  the  letter,  but  were 
entirely  extrinsic.  Nor  can  the  court  perceive  any  reason  for  distin- 
guishing between  circumstances  which  appear  in  the  letter  containing 
the  promise,  and  those  which  are  derived  from  other  sources.  The 
great  motive  for  construing  a  promise  to  accept  as  an  acceptance  is  that 
it  gives  credit  to  the  bill,  and  may  induce  a  third  person  to  take  it. 
If  the  letter  be  not  shown,  its  contents,  whatever  they  may  be,  can 
give  no  credit  to  the  bill;  and,  if  it  be  shown,  an  absolute  promise 
to  accept  will  give  all  the  credit  to  the  bill  which  a  full  confidence  that 
it  will  be  accepted  can  give  it.  A  conditional  promise  becomes  absolute 
when  the  condition  is  performed. 

In  the  case  of  Mason  v.  Hunt,  Doug.  296,  Lord  Mansfield  said : 
"There  is  no  doubt  but  an  agreement  to  accept  may  amount  to  an  ac- 
ceptance ;  and  it  may  be  couched  in  such  words  as  to  put  a  third  per- 
son in  a  better  condition  than  the  drawee.  If  one  man^  to  give  credit 
to  another,  makes  an  absolute  promise  to  accept  his  bill,  the^awee,  or 
any  other'pefson,  may  show  such  promise  upon  the  exchange,  to  get 
cjedit,  and  a  third  person,  who  should  advance  his  money  upon  it, 
would  have  nothing  to  do  with  the  equitable  circumstances  which  might 
subsist  between  the  drawer  and  acceptor." 

What  is  it  that  "the  drawer,  or  any  other  person,  may  show  upon 
the  exchange"?  It  is  the  promise  to  accept — the  naked  promise.  The 
motive  to  this  promise  need  not,  and  cannot,  be  examined.  The  prom- 
ise itself,  when  shown,  gives  the  credit;  and  the  merchant  who  makes 
it  is  bound  by  it. 

The  cases  cited  from  Cowper  and  Douglass  are,  it  is  admitted,  cases 
in  which  the  bill  is  not  taken  for  a  pre-existing  debt,  but  is  purchased 
on  the  credit  of  the  promise  to  accept.  But  in  the  case  of  Pillans  v. 
Van  ^Mierop  the  credit  was  given  before  the  promise  was  received  or 
the  bill  drawn ;  and  in  all  cases  the  person  who  receives  such  a  bill  in 
payment  of  a  debt,  will  be  prevented  thereby  from  taking  other  means 
to  obtain  the  money  due  to  him.    Any  ingredient  of  fraud  would,  un- 


104  ACCEPTANCE. OF   BILLS   OF    EXCHANGE 

questionably,  affect  the  whole  transaction ;  but  the  mere  circumstance 
that  the  bill  was  taken  for  a  pre-existing  debt  has  not  been  thought 
sufficient  to  do  away  the  effect  of  a  promise  to  accept. 

In  the  case  of  Johnson  and  Another  v.  Collins,  1  East,  98,  Lord 
Kenyon  shows  much  dissatisfaction  with  the  previous  decisions  on  this 
subject;  but  it  is  not  believed  that  the  judgment  given  in  that  case 
would,  even  in  England,  change  the  law  as  previously  established.  In 
the  case  of  Johnson  v.  Collins,  the  promise  to  accept  was  in  a  letter  to 
the  drawer,  and  is  not  stated  to  have  been  shown  to  the  indorser.  Con- 
sequently the  bill  does  not  appear  to  have  been  taken  on  the  credit  of 
that  promise.  It  was  a  mere  naked  promise,  unaccompanied  with  cir- 
cumstances which  might  give  credit  to  the  bill.  The  counsel  contended 
that  this  naked  promise  amounted  to  an  acceptance ;  but  the  court  de- 
termined otherwise.  In  giving  his  opinion,  Le  Blanc,  J.,  lays  down  the 
rule  in  the  words  used  by  Lord  Mansfield  in  the  case  of  Pierson  v. 
Dunlop;  and  Lord  Kenyon  said  that  "this  was  carrying  the  doctrine 
of  implied  acceptances  to  the  utmost  verge  of  the  law,  and  he  doubted 
whether  it  did  not  even  go  beyond  it"  In  Clarke  and  Others  v.  Cock, 
4  East,  57,  the  judges  again  express  their  dissatisfaction  with  the  law 
as  established,  and  their  regret  that  any  other  act  than  a  written  ac- 
ceptance on  the  bill  had  ever  been  deemed  an  acceptance.  Yet  they 
do  not  undertake  to  overrule  the  decisions  which  they  disapprove.  On 
the  contrary,  in  that  case,  they  unanimously  declared  a  letter  to  the 
drawer  promising  to  accept  the  bill,  which  was  shown  to  the  person 
who  held  it,  and  took  it  on  the  credit  of  that  letter  to  be  a  virtual  ac- 
ceptance. It  is  true,  in  the  case  of  Clarke  v.  Cock,  the  bill  was  made 
before  the  promise  was  given,  and  the  judges,  in  their  opinions,  use 
some  expressions  which  indicate  a  distinction  between  bills  drawn 
before  and  after  the  date  of  the  promise ;  but  no  case  has  been  decided 
on  this  distinction,  and  in  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins,  the 
letter  was  written  before  the  bill  was  drawn. 

The  court  can  perceive  no  substantial  reason  for  this  distinction. 
The  prevailing  inducement  for  considering  a  promise  to  accept  as  an 
acceptance  is  that  credit  is  thereby  given  to  the  bill.  Now,  this  credit 
is  given  as  entirely  by  a  letter  written  before  the  date  of  the  bill  as  by 
one  written  afterwards. 

It  is  of  much  importance  to  merchants  that  this  question  should  be 
at  rest.  Upon  a  review  of  the  cases  which  are  reported,  this  court  is 
of  opinion  that  a  letter  written  within  a  reasonable  time  before  or 
after  the  date  of  a  bilTof  exchange,  describing  it  in  terms  not  to  be 
mistaken,  and  promising  to  accept  it,  is,  if  shown  to  the  person  who 
afterwards  takes  the  bill  on  the  credit  of  the  letter,  a  virtual  acceptance 
binding  the  person  who  makes  the  promise.  This  is  such  a  case. 
There  is,  therefore,  no  error  in  the  judgment  of  the  Circuit  Court,  and 
it  is  affirmed  with  costs. 

Judgment  affirmed. 


PAROL   ACCErXANCB 


V.  Parol  Acceptance 


105 


JONT£S  V.  COUNCIL  BLUFFS  BRANCH  OF  STATE  BANK  OF 

IOWA. 

(Supreme  Court  of  IlUnoIs,  1SG4.     34  111.  313,  85  Am.  Dec.  .30G.) 

BeckwiTh,  J.  This  is  an  action  of  assumpsit  to  recover  the  sum 
of  money  mentioned  in  a  draft  dated  July  16,  1861,  drawn  by  Green 
&  Stone  on  the  appellants,  alleged  to  have  been  verbally  accepted  by 
them,  but  protested  for  nonacceptance.  The  defense  was  that  the 
promise  of  the  appellants  to  accept  did  not  constitute  an  acceptance, 
that  such  promise  was^  obtained  by  fraud,  and  that  its  consideration 
had  failed.  On  the  trial,  the  plaintiffs  offered  in  evidence  the  draft  and 
a  written  agreement  of  Green  &  Stone,  dated  August  1,  1861,  by  which 
they  transferred  to  the  appellants  all  their  interest  in  certain  property 
and  claims  for  commissions,  in  consideration  of  the  appellants  under- 
taking to  pay  the  draft  in  question.  The  plaintiffs  also  offered  evidence 
tending  to  prove  that  the  appellants  promised  Green  &  Stone  that  they 
would  accept  and  pay  the  draft,  and  that  the  appellees,  after  they  had 
taken  it,  were  informed  of  this  undertaking.  A  promise  by  the  drawee 
to  pay  an  existing  bill  is  an  acceptance,  or,  in  law,  amounts  to  an  ac- 
ceptance, whether  the  bill  was  taken  upon  the  faith  of  the  promise  or 
not.  A  promise  to  any  person  interested  in  having  a  bill  paid  inures 
to  the  benefit  of  the  holder.  These  principles  were  settled  in  the  time 
of  Lord  Ellenborough,  and  a  reference  to  any  of  the  text-books  will 
furnish  the  names  of  a  great  number  of  cases  in  w^hich  they  have  been 
acted  upon  in  England  and  in  this  country.  They  are  too  well  settled 
to  be  discussed  at  the  present  day.  The  court  below  found  there  was 
no  fraud  in  obtaining  the  promise,  and  we  are  entirely  satisfied  with  its 
finding. 

The  appellants'  agreement  to  accept  the  bill  was  for  the  benefit  of 
its  holders ;  and  the  agreement  of  Green  and  Jones  that  the  net  pro- 
ceeds of  the  property  and  the  commissions  transferred  to  the  appel- 
lants should  amount  to  a  certain  sum  was  solely  for  their  benefit.  The 
nonperformance  of  the  latter  agreement  furnishes  no  excuse  for  not 
accepting  and  paying  the  bill.  The  agreements  were  not  intended  to  be 
dependent  on  each  other.  The  undertaking  on  the  part  of  the  appel- 
lants was  that  they  would  pay  the  bills  when  they  became  due.  They 
were  to  convert  the  property  transferred  to  them  into  money  at  the 
best  price  they  could  obtain  for  it,  and  ascertain  the  amount  of  the 
commissions;  and  if  these  sums  did  not  amount  to  sufficient  to  pay 
the  bills  which  they  undertook  to  pay,  Green  and  Jones  undertook 

6  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §  53. 


106  ACCEPTANCE    OF    BILLS    OF   EXCHANGE 

to  pay  them  the  difference.  Such  was  the  legal  effect  of  theif  agree- 
ment. We  do  not  deem  it  necessary  to  make  a  critical  examination  of 
the  special  pleas  filed  by  the  appellants.  All  the  matters  set  up  in  them 
were  admissible  in  evidence  under  the  general  issue,  and  on  the  trial 
were  given  in  evidence  under  it.  The  appellants  have  had  all  the  bene- 
fit which  thej  can  derive  from  the  facts ;  and  if  the  demurrer  to  some 
of  the  pleas  was  improperly  sustained,  we  should  not  reverse  the  judg- 
ment after  the  appellants  have  had  the  full  benefit  of  their  defense  un- 
der the  general  issue.    Atlantic  Ins.  Co.  v.  Wright,  22  111.  462. 

Perceiving  no  error  in  the  record,  the  judgment  of  the  court  below 
will  be  affirmed. 


INDOKSEMENT  1^^ 


INDORSEMENT 
'     I.  Formal  Requisites  * 


HAINES  V.  DUBOIS. 

(Supreme  Court  of  New  Jersey,  1863.     30  N.  J.  Law,  2r,0.) 

On  rule  to  show  cause,  etc.  The  issue  in  this  case  was  tried  at  the 
Salem  circuit,  and  a  verdict  rendered  for  the  plaintiff.  The  defend- 
ant seeks  to  have  the  verdict  set  aside,  and  a  new  trial  granted,  be- 
cause he  was  not  an  indorser  of  the  note  sued  on,  and  if  an  indorser 
he  had  no  sufficient  notice  of  nonpayment.- 

WiiELPLEv,  C.  J.  The  only  question  made  upon  the  argument  was 
whether  Dubois,  who  was  sued  as  indorser  of  a  note,  was  duly  notified 
of  its  dishonor. 

The  note  was  made  by  John  W.  Wright,  payable  to  the  order  of 
Dubois,  to  secure  a  debt  which  he  owed  to  one  Thomas  Newell.  He 
agreed  to  give  security  for  the  delay  of  eight  months,  the  time  the 
note  had  to  run,  and  took  the  note  so  made  away  with  him,  and  brought 
it  back  with  the  name  of  Dubois  written  under  that  of  Wright,  the 
maker.  It  did  not  appear  upon  the  trial  that  Dubois  refused  to  indorse 
the  note,  but  was  willing  to  be  a  joint  maker.  No  evidence  was  given 
to  show  why  he  did  not  indorse  his  name,  as  usual,  on  the  back,  instead 
of  writing  it,  as  he  did,  on  the  face.  Dubois  was  sworn  upon  the  trial, 
and  did  not  pretend  that  he  did  not  intend  to  indorse  the  note.  He 
knew  that  the  note  was  payable  to  his  order,  and  could  not  be  nego- 
tiated without  his  indorsement,  and  with  this  knowledge  put  his  name 
upon  it.    It  was  a  sufficient  indorsement. 

If  the  payee  write  his  name  on  any  part  of  the  note  with  the  inten- 
tion of  indorsing  it,  it  is  a  sufficient  indorsement.  An  indorsement, 
as  the  word  mfports,  is  usually  put  upon  the  back  of  a  note ;  that  is 
the  regular  mode,  but  the  place  where  written  is  by  no  means  essential. 
Partridge  v.  Davis,  20  Vt.  499-503. 

In  Rex  v.  Biggs,  3  P.  Wms.  419^28,  it  was  held,  under  a  statute 
making  it  a  felony  to  alter  or  erase  an  indorsement  on  a  bill  or  bank 
note,  that  a  defendant,  who  had  erased  with  lemon  juice  a  receipt  for 
part  payment  written  on  the  face  of  a  bank  note,  was  properly  con- 
victed under  the  act  for  erasing  an  indorsement. 

This  is  much  like  the  question  of  how  the  indorser's  name  must  be 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
56,  57. 

-  The  opinions  of  Ogden  and  Van  Dyke,  JJ.,  are  omitted. 


lOS  INDORSEMENT 

written.  It  has  been  held  that  a  writing  in  pencil  is  sufficient;  so  ai> 
indorsement  by  initials,  and  even  by  figures  has  been  held  good.  Brown 
V.  Butchers'  Bank,  6  Hill  (N.  Y.)  443,  41  Am.  Dec.  755,  and  cases  there 
cited;  Merchants'  Bank  v.  Spicer,  6  Wend.  (N.  Y.)  445.  The  true 
rule  is  stated  by  Nelson,  C.  J.,  in  the  case  cited  from  6  Hill,  443,  that 
a  person  may  become  bound  by  any  mark  or  designation  he  thinks 
proper  to  adopt,  provided  he  uses  it  as  a  substitute  for  his  name,  and  he 
intends  to  bind  himself.  For  the  same  reason,  the  place  where  the 
name,  or  mark,  or  designation  is  put  is  not  material,  if  the  signer  in- 
tended it  as  an  indorsement. 

The  notary,  misled  by  the  place  in  which  he  found  Dubois'  signature, 
sent  notice  to  him  as  the  maker  of  the  note.  This  notice  Dubois,  on  the 
trial,  admitted  he  had  received,  and  did  not  deny  that  he  was  fully 
apprised  by  it  that  the  note  was  duly  presented  for  payment  at  the 
Salem  Bank,  where  it  was  payable,  payment  demanded  of  the  maker, 
and  refused.  A  short  time  before  the  note  became  due  he  called  upon 
the  plaintiff,  to  whom  Newell  transferred  it  when  made,  asked  to  see  it, 
saw  it,  and  remarked  that  it  was  correct. 

He  was  not  indorser  upon  any  other  note  at  the  time  with  which 
this  might  have  been  confounded.  In  short,  the  case  leaves  no  room 
for  doubt  that  he  was  fully  apprised  by  the  notice  of  the  dishonor  of 
the  note,  and  by  fair  implication,  that  he  was  looked  to  for  payment. 
The  notice  in  fact  answered  all  the  purposes  for  which  a  notice  is  re- 
quired to  be  sent  to  an  indorser.  This  was  held  sufficient  in  Howland 
V.  Adrain  (decided  at  June  term,  1862)  30  N.  J.  Law,  41. 

No  exception  was  taken  in  the  defendant's  brief  to  the  place  where 
the  notice  was  sent. 

The  verdict  was  right  upon  the  evidence,  and  there  should  be  judg- 
ment for  the  plaintiff. 


SEARS  V.  LANTZ  &  BATES  et  al. 
(Supreme  Court  of  Iowa,  1878.    47  Iowa,  658.) 

Action  against  the  defendants  Lantz  &  Bates  as  makers,  and  John 
Bowman  as  indorser,  of  a  negotiable  promissory  note.  A  demurrer 
having  been  sustained  to  so  much  of  the  petition  as  sought  to  charge 
Bowman  as  indorser,  the  plaintiff  appeals. 

Seevi^RS,  J.  The  note  was  payable  to  the  defendant  Bowman  or 
order,  and  he  wrote  on  the  back  thereof  the  following :  "December 
18,  1876.  I  hereby  assign  all  my  right  and  title  to  Louis  Meckley. 
John  Bowman."  The  ground  of  demurrer  was  in  substance  that  no 
cause  of  action  existed  against  the  defendant.  Bowman,  under  and  by 
virtue  of  the  said  writing.  Without  doubt  it  amounts  to  an  assignment 
of  all  the  defendant's  right  and  title  in  the  note.  Does  this  subject 
him  to  the  Habilities  of  an  indorser?  is  the  question  for  determination. 
An  indorsement  differs  from  an  assignment,  in  that  an  indorsee  may 


FORMAL    HEQUISITES  109 

"bring  the  action  in  his  own  name,  and  an  ^ssignee_cannot.    2  Parsons 
on  Notes  and  Bills,  1. 

It  was  held  in  McCarty  v.  Clark,  10  Iowa,  588,  that  the  assignment 
of  a  promissory  note  as  collateral  security  for  the  payment  of  another 
debt  passed  the  title  to  the  indorsee,  and  that  he  could  sue  in  his  own 
name  without  averring  or  showing  that  the  indebtedness  secured  by 
the  note  had  been  paid. 

In  Childs  v.  Davidson,  38  111.  438,  it  was  held  that  "I  guarantee  the 
payment  of  the  within  note"  amounted  to  an  assignment,  and  trans- 
ferred the  legal  title  to  the  note  so  as  to  enable  the  holder  to  maintain 
an  action  against  the  maker.  See,  also,  Rowe  v.  Haines,  15  Ind.  445, 
77  Am.  Dec.  101. 

In  Sands  v.  Wood,  1  Iowa,  263,  it  was  held  the  words  "I  assign  the 
within  note  to  Aliss  Sarah  Coffin"  amounted  to  an  indorsement,  and 
the  party  so  transferring  the  note  became  liable  as  an  indorser. 

The  effect  of  the  assignment  in  Sands  v.  Wood  was  to  assign  and 
transfer  whatever  title  the  assignor  had  in  the  note.  He  used  no  words 
that  in  and  of  themselves  indicated  that  he  bound  or  made  himself 
liable  in  case  the  maker  after  demand  failed  to  pay  the  note.  But  it 
was  held  the  law  as  a  legal  conclusion  attached  to  the  words  used  the 
liability  that  follows  the  indorsement  of  a  promissory  note. 

It  will  be  difficult,  we  apprehend,  to  draw  a  distinction  between  that 
case  and  the  one  at  bar.  Here  the  defendant  assigned  all  his  right 
and  title  in  the  note,  and  this  in  legal  contemplation  was  the  effect  of 
the  assignment  in  Sands  v.  Wood. 

In  neither  case  was  there  any  limit  attached  to  the  liability  of  the 
assignor.  That  resulted  as  a  legal  conclusion.  It  must  be  regarded 
as  settled  in  this  state  that  the  assignment  of  a  promissory  note  by  the 
payee  thereof,  in  writing  on  the  note,  vests  the  legal  title  therein  in 
the  assignee,  so  as  to  enable  him  to  bring  an  action  in  his  own  name 
against  the  maker.  Such  being  true,  an  assignment  amounts  to  an  in- 
dorsement, and  makes  the  assignor  liable  as  an  indorser,  within  the  rule 
laid  down  by  Parsons,  above  cited. 

The  result  is  the  demurrer  should  have  been  overruled. 

Reversed. 


THORP  V.  MINDEMANN. 

(Supreme  Court  of  Wisconsin,  1904.    123  Wis.  149,  101  N.  W.  417,  68  L.  R.  A. 

146,  107  Am.  St  Rep.  1003.) 

This  case  is  reported  on  page  36,  supra. 


110  INDORSEMENT 

CENTRAL  TRUST  CO.  v.  FIRST  NAT.  BANK. 

(Supreme  Court  of  the  United  States,  1S79.     101  U.  S.  OS,  25  L.  Ed.  S7G.) 

Strong,  J.     This  case,  as  made  by  the  bill,  answers,  replications, 
and  proofs,  is  as  follows:    On  the  24th  day  of  September,  1874,  the 
First  National  Bank  of  Wyandotte,  Kan.,  made  its  promissory  note  at 
Chicago,  111.,  in  these  words : 
"$5,000.  Chicago,  Illinois,  Sept.  24,  1874. 

"Four  months  after  date  we  promise  to  pay  to  Cook  County  National 
Bank,  of  Chicago,  or  order,  five  thousand  dollars,  with  interest  at  the 
rate  of per  cent,  per  annum  after  due,  value  received,  all  pay- 
able at  Cook  County  National  Bank.  B.  Judd, 

"Cashier  1st  Nat'l  Bank,  Wyandotte,  Kas. 

"$6,000  Wyandotte  Co.  and  City  bonds  as  collateral." 

The  note  was  made  and  delivered  to  the  Cook  County  Bank,  in  pur- 
suance of  an  arrangement  between  that  bank  and  Judd,  the  cashier 
of  the  Wyandotte  Bank,  by  which  it  was  agreed  the  latter  should  ex- 
ecute a  four  months  note  for  $5,000,  with  security,  and  have  the  same 
discounted  by  the  Cook  County  Bank,  and  the  proceeds  placed  to  the 
credit  of  the  Wyandotte  Bank,  but  not  to  be  drawn  against  so  as  to 
reduce  the  credit  for  such  proceeds  below  $4,000 — such  note  to  remain 
with  the  Cook  County  Bank,  and  to  be  surrendered  to  the  maker  on 
the  renewal  or  close  of  the  account.  It  was  distinctly  understood  be- 
tween the  officers  of  the  two  banks  when  the  note  was  given  that  it 
should  be  held  by  the  Cook  County  Bank  as  a  memorandum,  and  not 
be  negotiated  or  separated  from  the  Wyandotte  city  and  county  bonds 
for  $6,000  accompanying  it,  which  were  delivered  contemporaneously 
with  it  as  collaterals.  Accordingly,  the  sum  of  $4,000,  part  of  the  pro- 
ceeds of  the  discount,  was  suffered  to  remain  on  deposit  to  the  credit 
of  the  Wyandotte  Bank  until  the  Cook  County  Bank  failed,  became 
insolvent,  and  passed  into  the  hands  of  a  receiver.  At  the  time  of  such 
failure  and  the  appointment  of  a  receiver  there  was  also  an  additional 
credit  of  $868  due  from  the  Cook  County  Bank  to  the  Wyandotte 
Bank.  When,  therefore,  the  note  matured  there  was  due  from  the 
payee  to  the  maker  of  the  note  the  sum  of  $4,868.  But  before  its  ma- 
turity, to  wit,  on  the  7th  day  of  October,  1874,  the  Cook  County  Bank, 
in  violation  of  its  agreement  above  mentioned,  passed  the  note  to  the 
New  York  State  Loan  &  Trust  Company,  by  which  it  was  discounted, 
without  any  knowledge  of  any  defense  which  the  Wyandotte  Bank  had 
against  it,  or  any  knowledge  of  the  origin  of  the  note  and  of  the 
agreement  between  the  two  banks,  other  than  what  the  face  of  the  note 
revealed. 

The  note  was  protested  when  it  fell  due,  and  it  is  now  held  by  the 
Central  Trust  C6fnpa.ny-of-TSkw  York,  the  receiver  of  the  New  York 
State  Loan  &  Trust  Company,  and  the  collaterals,  the  municipal  bonds,, 
are  held  still  by  the  Cook  County  Bank. 


FOUMAL  REQUISITES  1  1  ^ 

This  bill  has  been  filed  to  compel  its  surrender  and  the  surrender  of 
the  Wyandotte  city  and  county  bonds  on  the  payment  of  $132,  the 
difference  between  $5,000  and  $4,868,  the  sum  standing  to  the  credit 
of  the  Wyandotte  Bank  against  the  payee;  the  claimant  offering  to 
pay  that  sum. 

In  view  of  these  facts,  fairly  deducible  from  the  evidence,  it  is  mani- 
fest that,  as  between  the  complainant  and  the  Cook  County  Bank,  there 
is  a  perfect  defense  against  the  note  to  the  extent  of  $4,868,  the  sum 
standing  to  the  credit  of  the  Wyandotte  Bank  due  from  the  payee.  On 
the  payment  of  $132  the  maker  of  the  note  has  a  clear  equity  to  have 
it  surrendered,  together  with  the  municipal  bonds  held  as  collaterals. 

But  it  is  claimed  that  the  trust  company,  having  received  the  note 
before  its  maturity,  and  having  discounted  it  in  the  usual  course  of 
business  without  any  knowledge  of  any  equities  or  defense  against  it, 
is  entitled  to  hold  it  free  from  any  defense  which  the  maker  could 
set  up  against  the  payee ;  that  is,  against  the  Cook  County  Bank. 

A  large  portion  of  the  argument  before  us  has  been  expended  upon 
the  questions  whether,  inasmuch  as  the  note  was  given  by  the  cashier 
of  the  Wyandotte  Bank  at  Chicago,  and  was  made  payable  at  a  future 
day,  it  was  not  void  under  the  general  banking  law.  We  pass  those 
questions  as  unnecessary  to  be  considered.  If  it  be  conceded  that  the 
note  was  valid  at  its  inception,  it  is  certainly  true  the  maker  had  a  good 
defense  against  it  while  it  was  in  the  hands  of  the  payee,  and  we  do 
not  perceive  that  the  manner  in  which  the  trust  company  or  its  receiver 
obtained  it  puts  them  or  either  of  them  in  any  better  position  than 
the  payee  occupied. 

The  notejyas  not  indorsed  to  the  trust  company,  and  it  was  not, 
therefore,  takeiTm  the  usual  course  of  business  by  that  mode  of  trans- 
fer in  which  negotiable  paper  is  usually  transferred.  Had  it  been  in- 
dorsed by  the  Cook  County  Bank,  it  may  be  that  the  trust  company 
would  hold  it  unaffected  by  any  equities  between  the  maker  and  the 
payee.  But  instead  of  an  indorsement,  the  president  of  the  Cook 
County  Bank  merely  guaranteed  its  payment,  and  handed  it  over  with 
this  guaranty  to  the  trust  company.  The  note  was  not  even  assigned. 
There  was  written  upon  it  only  the  following : 

"For  value  received,  we  hereby  guarantee  the  payment  of  the  within 
note  at  maturity  or  at  any  time  thereafter,  with  interest  at  10  per  cent, 
per  annum  until  paid,  and  agree  to  pay  all  costs  and  expenses  paid  or 
incurred  in  collecting  the  same.  B.  F.  Allen,  Pres't." 

In  no  commercial  sense  is  this  an  indorsement,  and  probably  it  was 
not  intended  as  such.  AKehn-iad  agree'd  that  the  note  should  not  be 
negotiated,  and  for  this  reason  perhaps  it  was  not  indorseB.  That  a 
guaranty  is  not  a  negotiation  of  a  bill  or  note,  as  understood  by  the 
law  merchant,  is  certain.  Snevily  v.  Ekcl,  1  Watts  &  S.  (Pa.)  203  ; 
Lamourieux  v.  Hewit,  5  Wend.  (N.  Y.)  307;  Miller  v.  Gaston,  2  Hill 
(N.  Y.")  1S8.     In  this  case,  the  guaranty  written  on  the._note_was_filled 


113  INDORSEMENT 

Up.  It  expressed  fully  the  contract  between  the  Cook  County  Bank 
"and  the  trust  company.  Being  express,  it  can  raise  no  implication  of 
any  other  contract.  "Expressum  facit  ccssare  tacitum."  The  contract^ 
cannot,  therefore,  be  converted  into  an  indorsement  or  an  assignment. 
And  if  it  could  be  treated  as  an  assignment  of  the  note,  it  would  not 
cut  off  the  defenses  of  the  maker.  Such  an  effect  results  only  from  a 
transfer  according  to  the  law  merchant ;  that  is,  from  an  indorsement. 
An  assignee  stands  in  the  place  of  his  assignor,  and  takes  simply  an  as- 
signor's rights ;  but  an  indorsement  creates  a  new  and  collateral  con- 
tract.   2  Parsons,  Notes  and  Bills,  46  et  seq.,  notes. 

At  best,  therefore,  the  defendants  below  can  claim  no  more  or  great- 
er rights  than  those  of  the  Cook  County  Bank,  and  the  complainants 
are  entitled  to  a  return  of  the  note  and  of  the  collaterals  on  payment 
of  the  sum  of  $132. 

Decree  affirmed. 


II.  Indorsement  in  Blank  and  Special  Indorsement  * 


PEACOCK  V.  RHODES. 

(Court  of  King's  Bench,  17S1.    2  Doug.  633.) 
This  case  is  reported  on  page  1,  supra. 


BURCH  et  al.  v.  DANIEL. 
(Supreme  Court  of  Georgia,  1897.     101  Ga.  228,  28  S.  E.  622.) 

Lumpkin,  P.  J.  In  order  to  authorize  one  to  institute  and  maintain 
in  his  own  name  an  action  upon  a  promissory  note,  the  legal  title  to 
the  paper  must  be  in  the  plaintiff. 

This  was  an  action  by  Daniel  upon  promissory  notes  which  were 
originally  payable  to  John  A.  Fretwell,  or  order.  Upon  each  of  the 
notes  was  written  the  following  transfer :  "For  value  received,  I  here- 
by sell  and  transfer  the  within  note  to  C.  S.  Pope,  without  recourse  on 
me.  J.  A.  Fretwell."  Without  the  knowledge  or  consent  of  the  makers 
of  the  notes,  the  word  "order"  had  been  in  each  of  them  erased,  and 
the  word  "bearer"  substituted  in  its  stead,  before  the  action  was 
brought,  though  it  does  not  appear  when  or  by  whom  these  alterations 
had  been  made,  or  that  this  had  occurred  before  Daniel,  the  plaintiff", 
became  possessed  of  the  notes.  Whatever  may  be  the  truth  as  to  this 
matter,  it  is  certain  that  the  legal  title  to  the  notes  was  not  in  the  plain- 
tiff when  he  brought  his  action.     Manifestly  it  was  in  Pope,  as  the 

3  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
58-01. 


INDORSEMENT   IN    BLANK    AND   SPIXIAL    INDORSEMENT  113 

notes  had  never  been  indorsed  by  him  to  any  one.  The  unauthorized 
change  in  the  phraseology  of  the  notes,  whether  innocently  or  fraudu- 
lently made,  did  not  render  them  negotiable  by  mere  delivery.  If  Dan- 
iel_was_inj[act  the  equitable  owner  of  the  notes,  he  might  have  insti- 
tuted^n  action^lhcreon,  for  his  use,  in  the  name  of  the  person  holding 
IheTcgal  titfe;  but,  under  the  facts  as  they  appear  in  the  record  before 
us,  his  case  falls  squarely  within  the  rule  announced  at  the  beginning 
of  this  opinion.  In  this  connection,  see  Dalton  City  Co.  v.  Johnson,  57 
Ga.  398 ;  Benson  v.  Abbott,  Parker  &  Co.,  95  Ga.  69,  22  S.  E.  127, 
Judgment  reversed. 


SMITH  et  al.  v.  CLARKE. 
(Nisi  Prius,  before  Lord  Kenyon,  C.  J.,  1794.     Peake,  295.) 

This  action  was  brought  by  the  plaintiffs  as  indorsees  of  a  bill  of 
exchange  against  the  acceptor. 

Th"e~brir"was  indofsed  in  blajik  by  the  payee,  and  after  several  in- 
dorsementT  it  came  to  one  Jackson  (whose  assignees  had  indemnified 
the  present  defendant)  under  a  special  indorsement  to  him  or  order. 
Jackson  sent  it  to  Muir  &  Atkinson,  and  they  discounted  it  with  the 
plaintiffs,  but  Jackson  had  not  indorsed  it;  The  plaintiff's  had  struck 
out  all  the  indorsements  except  the  first. 

Law,  "for  the  defendant,  objected  that  this  special  indorsement  had 
restrained  the  negotiability  of  the  bill,  and  that  the  plaintiff's  could  not 
recover  without  an  indorsement  by  Jackson. 

Lord  Kenyon,  The  fair  holder  of  a  bill  may  consider  himself  as 
the  indorsee  of  the  payee,  and  strike  out  all  the  other  indorsements. 
This  special  indorsement  being  made  after  the  payee  had  indorsed  it, 
cannot  aft'ect  the  title  of  the  present  plaintiffs. 

Note. — The  plaintiffs  afterwards  proved  a  letter  from  Jackson  to 
Muir  &  Atkinson,  desiring  them  to  discount  this  and  other  bills,  but 
Lord  Kenyon  thought  the  plaintiffs'  case  sufficiently  made  out  without 
this  evidence. 


RIDER  V.  TAINTOR. 

(Supreme  Judicial  Court  of  Massachusetts,  Berksliire,  1862.     4  Allen.  35G.) 

Contract  upon  the  following  promissory  note :  "$107.  Six  months 
from  date,  for  value  received,  I  promise  to  pay  Stephen  E.  Avery  or 
bearer  one  hundred  and  seven  dollars  with  use.  Lee,  December  1, 
1860.  Albert  J.  Taintor."  The  note  bore  the  following  indorsement: 
"Pay  E.  A.  Bliss,  cashier,  or  order.    Warren  Newton,  Cashier." 

At  the  trial  in  the  superior  court,  it  appeared  that  the  plaintiff'  had 
purchased  the  note  in  suit  before  it  became  due  for  a  full  considera- 
tion, but  the  bill  of  exceptions  stated  that  "there  was  no  evidence  that 
Moore  Cases  B.&  N. — S 


Hi  INDORSEMENT 

E.  A.  Bliss,  to  whom  said  note  had  been  indorsed,  had  transferred  or 
indorsed  said  note  to  the  plaintiff,"  or  "that  the  plaintiff  had  any  title 
in  said  note  from  said  Bliss,  or  that  said  note  was  sued  with  the  knowl- 
edge or  assent  of  said  Bliss."  Rockwell,  J.,  ruled  that  the  plaintiff  was 
entitled  to  recover,  and  the  jury  returned  a  verdict  accordingly;  and 
the  defendant  alleged  exceptions. 

BiGELOW,  C.  J.  The  contract  of  the  promisor  of  the  note  declared 
on  is  to  pay  the  sum  due  on  the  note  at  its  maturity  to  the  person  Avho 
shall  then  be  the  bearer.  The  production  of  the  note  by  the  plaintiff  is 
therefore  evidence  of  his  title,  and,  accompanied  as  it  was  in  the  present 
case  with  proof  that  the  plaintiff  had  become  the  owner  of  the  note 
by  purchase  before  it  became  due,  established  a  conclusive  right  to  re- 
cover against  the  defendant. 

The  indorsement  of  a  third  person,  directing  the  payment  of  the 
note  to  be  made  to  the  order  of  another,  did  not  change  the  contract 
of  the  promisor,  or  enable  him  to  set  up  in  defense  that  the  plaintiff's 
title  was  imperfect,  merely  because  he  had  not  obtained  the  signature 
of  the  person  to  whom  some  intermediate  holder  had  ordered  the  note 
to  be  paid.  Wilbour  v.  Turner,  5  Pick.  526;  Wayman  v.  Bend,  1 
Camp.  175;  Story  on  Notes,  §  132. 

Exceptions  overruled. 


III.  Indorsements  Without  Recourse,  Conditional,  and  Restrictive 

Indorsements  * 


EPLER  V.  FUNK. 

(Supreme  Court  of  Pennsylvania,  1848.     8  Pa.  468.) 

Rogers,  J.^  This  is  an  action  by  an  indorser  against  the  maker  to 
recover  $100,  payable  to  the  order  of  Henry  Hamer  12  months  after 
date.  It  is  indorsed  to  J.  M.  Funk,  without  recourse.  The  defense  is, 
that  the  consideration  of  the  note  was  for  the  right  of  vending  Hoov- 
er's patent  cornstalk  cutting  machine,  in  Dauphin  county;  that  the 
machine  was  entirely  worthless,  and  that  defendant  was  induced  to 
enter  into  the  contract  by  combination,  contrivance,  and  fraud.  The 
plaintiff,  after  proving  the  handwriting  of  the  maker  and  indorser, 
offered  the  note  in  evidence,  which  was  objected  to,  because,  the  de- 
fendant says,  it  is  not  admissible  under  the  statement  filed,  and  in  a 
case  like  this  it  is  necessary  to  file  a  narr.,  setting  out  specially  the 
cause  of  action,  the  transfer  of  it,  and  all  the  special  circumstances. 
But  we  are  of  opinion  there  is  nothing  in  the  objections.     The  case 

*  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§ 
62-f;4. 

5  Part  of  the  opinion  is  omitted. 


INDORSEMENTS   RESTRICTIVE    OK    WITHOUT   RECOURSE  H-J 

was  clearly  embraced  by  the  statement,  and  the  cause  of  action  is  set 
out  with  convenient  certainty.  There  is  nothing  in  the  second  bill.  An 
indorser,  it  is  true,  is  not  a  competent  witness  for  the  indorsee ;  but 
where  he  is  released  by  the  indorsee,  as  here,  he  is  competent,  not  to 
impeach,  but  to  enforce  payment  of,  the  note.  This  has  been  repeat- 
edly ruled.  Vide  Barnes  v.  Ball  et  al.,  1  Mass.  72^;  Rice  v.  Stearns,  3 
Mass.  225,  3  Am.  Dec.  129. 

The  third  bill  presents  more  difficulty.  The  defendant  contends  that, 
under  the  circumstances  exhibited  on  the  face  of  the  note,  on  the  special 
indorsement  and  the  facts  given  in  evidence,  he  is  entitled  to  make  the 
same  defense  against  the  indorser  as  between  the  original  parties  to 
the  note.  The  note  is  indorsed  by  the  payee  to  the  order  of  J.  M.  Funk, 
the  plaintiff,  "without  recourse."  This,  it  is  said,  is  not  in  the  usual 
course  of  business;  that  it  was  sufficient  to  put  the  indorser  on  his 
guard,  and  to  lead  him  to  suspect  there  was  something  wrong  in  the 
transaction,  as  between  the  maker  and  payee.  But  although  most 
usually  notes  go  forth  indorsed  in  blank,  yet  I  cannot  agree  that  such 
an  indorsement  affects  the  negotiable  quality  of  the  paper.  It  shows 
only  an  unwillingness  to  be  answerable  for  the  solvency  of  the  maker 
— a  prudent  precaution,  particularly  where,  as  here,  the  note  has  a  long 
timelb  run  before  it  matures.  And  this  is  the  view  taken  of  this  fact 
in  Rice  v.  Stearns,  3  Mass.  225,  3  Am.  Dec.  129.  In  that  case  a  promis- 
sory note  was  indorsed  specially  thus :  "For  value  received,  I  order 
the  contents  of  the  note  to  be  paid  to  A.  B.,  at  his  own  risk."  Two 
points  were  ruled:  (1)  That  in  an  action  on  such  a  note,  by  the  in- 
dorser against  the  maker,  the  promisee  is  a  witness  to  prove  the  exe- 
cution of  the  note.  (2)  Which,  I  take  it,  is  the  case  here,  such  special 
indorsement  transfers  the  property  of  the  note,  with  its  negotiable 
quality,  to  the  indorser. 

There  seems  to  be  no  question  that  there  was  a  consideration  passing 
between  the  present  holder  and  the  payee.     *     *     * 

Judgment  affirmed. 


ROBERTSON  v.  KENSINGTON  et  al. 
(Court  of  Common  Pleas,  1811.    4  Taunt.  30.) 

This  was  an  action  of  assumpsit,  and  the  first  count  in  the  declara- 
tion was  on  a  bill  of  exchange,  of  which  the  following  is  a  copy,  viz. 

"Edinburgh,  18th  Nov.,  1808. 

"£180.  sterling.  At  45  days  after  date,  pay  this  first  of  exchange,  to 
the  order  of  Mr.  Robert  Robertson,  il80.  sterling,  value  received, 
which  place  to  account,  as  advised.  W.  Forbes,  J.  Hunter  &  Co. 

"To  Messrs.  Kensington,  Styan  &  Adams,  Bankers,  London. 

"Accepted,  Kensington  &  Co.    Entered,  P.  J.  Raeburn." 

Indorsed:  "Edinburgh,  19  Nov.  1808.  Pay  the  within  sum  to 
Messrs.  Clerk  &  Ross,  or  order,  upon  my  name  appearing  in  the  Ga- 


IIG  INDORSEMENT 

zette  as  ensign  in  any  regiment  of  the  line,  between  the  1st  and  64th,  if 
within  two  months  from  this  date.  R.  Robertson."  "Clerk  &  Ross." 
'7.  Tindale."  "Thomas  Eyre  &  Sons."  "Thomas  Nelson."  "Dudding 
&  Nelson."    "Bank  of  England." 

The  plaintiff  declared  as  payee,  against  the  defendants  as  acceptors. 
The  declaration  also  contained  counts  for  money  had  and  received 
by  the  defendants  to  the  use  of  the  plaintiff,  for  money  paid  by  the 
plaintiff'  to  the  use  of  the  defendants,  on  an  account  stated,  and  for 
interest. 

The  plea  was  the  general  issue.  At  the  trial  of  this  cause  before 
Mansfield,  C.  J.,  and  a  special  jury,  at  the  sittings  after  Hilary  term, 
1811,  at  Guildhall,  a  verdict  was  entered  by  consent  for  the  plaintiff 
for  the  sum  of  il80.,  subject  to  the  opinion  of  the  court  on  the  follow- 
ing case : 

The  bill,  which  was  for  £180.,  was  drawn  at  Edinburgh  on  the  18th 
November,  1808,  by  Sir  Wm.  Forbes,  J.  Hunter  &  Co.,  upon  the  de- 
fendants, who  are  bankers  in  London,  payable  to  the  order  of  the  plain- 
tiff, at  45  days  date,  for  value  received.  The  indorsements  by  the  plain- 
tiff, and  by  Clerk  &  Ross,  as  above  set  forth,  were  made  before  the 
bill  was  presented  to  the  defendants  for  acceptance.  The  bill  was  de- 
livered to  Clerk  &  Ross,  army  agents  in  Edinburgh,  being  persons  then 
employed  by  the  plaintiff  to  procure  for  him  by  purchase  the  commis- 
sion of  ensign  above  referred  to.  The  bill,  with  those  indorsements 
upon  it,  was  afterwards  presented  to  the  defendants  for  acceptance, 
and  accepted  by  them  in  the  usual  course  of  their  business  as  bankers. 
It  was  afterwards  indorsed  and  negotiated  by  the  other  persons  whose 
names  appear  as  indorsers,  and  finally  with  the  Bank  of  England,  who 
discounted  it.  At  the  expiration  of  the  45  days  specified  in  the  bill  as 
originally  drawn,  and  the  days  of  grace,  the  defendants  paid  the  con- 
tents to  the  Bank  of  England,  who  presented  it  to  them  for  payment. 
The  plaintiff,  at  the  time  of  drawing  the  bill,  paid  the  full  value  for  the 
same  to  Sir  Wm.  Forbes,  J.  Hunter  &  Co.,  the  drawers,  but  did  not 
ask,  or  obtain,  their  consent,  or  that  of  the  defendants,  the  acceptors, 
to  make  any  alteration  in  the  tenor  of  the  bill  by  indorsement  either  as 
to  the  condition  of  the  payment,  or  the  extension  of  time.  The  plain- 
tiff's name  had  never  appeared  in  the  Gazette  as  ensign  in  any  regiment 
of  the  line. 

The  question  for  the  opinion  of  the  court  was  whether  the  plaintiff 
was  entitled  to  recover.  H  he  was,  the  verdict  was  to  stand ;  if  he  was 
not  entitled  to  recover,  a  verdict  was  to  be  entered  for  the  defendants. 

This  case  was  argued  by  Lens,  Serjt.,  for  the  plaintiff,  who  con- 
tended that  it  was  competent  for  the  plaintiff'  by  this  special  indorse- 
ment to  make  only  a  conditional  transfer  of  the  absolute  interest  in  the 
bill,  which  he  had  purchased  for  a  full  consideration,  and  had  vested 
in  him  by  the  delivery  of  the  drawer.  The  defendants,  by  subsequently 
accepting  the  bill,  had  become  parties  to  that  conditional  transfer,  and 


INDORSEMENTS   RESTRICTIVE   OR   WITHOUT    RECOURSE  117 

as  the  conclition  had  ncver_bcen  performed,  the  transfer  was  defeated, 
and  they  became  liable,  after  Uie_  expiration  of  the  two  months,  to  pay 
the  plaintiff,  to_\vhom  the  property_then  reverted,  the  contents  of  the 
bill,  of  which  none  of  the  indorsers  could  enforce  payment  against  the 
defendants  at  the  45  days'  end,  because  they  had  all  received  the  bill 
subject  to  the  condition,  and  were  bound  thereby.  He  cited  Ancher 
V.  Bank  of  England,  Doug.  638. 

Shepherd,  Serjt.,  for  the  defendant,  contended  that  it  was  imma- 
terial whether  the  acceptance  was  before  or  after  the  conditional  in- 
dorsement. The  acceptance  admitted  the  handwriting  of  the  drawer, 
but  it  did  not  mix  itself  with  the  conduct  of  the  indorsers.  It  admitted 
nothing  which  was  on  the  back  of  the  bill.  The  whole  practice  of 
the  courts  was  accordingly ;  for  in  an  action  against  the  acceptor  it  be- 
came unnecessary  to  prove  the  handwriting  of  the  drawer,  but  it  was 
necessary  to  prove  the  handwriting  of  the  indorser. 

The  Court  gave  judgment  for  the  plaintiff. 


BLAINE,  GOULD  &  SHORT  v.  BOURNE  &  CO. 

(Supreme  Court  of  Rhode  Island,  1875.     11  R.  I.  119,  23  Am.  Rep.  429.) 

Assumpsit  on  a  bill  of  exchange,  heard  by  the  court. 

Potter,  J.    The  dratt  in  question  was  as  follows : 

"Banking  House  of  Blaine,  Gould  &  Short, 

"North  East,  Pa.,  August  16,  1873. 

"Thirty  days  after  date  pay  to  the  order  of  Frank  Thayer  seven 
hundred  dollars.  Frank  Thayer. 

"To  Messrs.  B.  G.  Chace  &  Co.,  Providence,  R.  I. 

"Due  September  18." 

Thayer  was  the  agent  in  Pennsylvania  to  make  purchases  for  Chace 
&  Co.,  of  Providence,  and  he  drew  on  them  for  payment. 

This  draft  was  indorsed  by  Thayer  in  blank,  and  was  discounted 
by  the  plaintiffs  before  acceptance.  The  plaintiffs  indorsed  it  as  fol- 
lows: 

"Pay  Jay  Cooke  &  Co.,  or  order,  on  account  of  Blaine,  Gould  & 
Short,  North  East,  Pa.  Alfred  A.  Short,  Cash'r." 

By  Jay  Cooke  &  Co.  it  was  sent  to  the  defendants  in  Providence 
for  collection,  indorsed  as  follows : 

"Pay  to  the  order  of  Messrs.  Bourne  &  Co.  Jay  Cooke  &  Co." 

The  draft  was  paid  by  Chace  &  Co.  to  the  defendants  about  noon 
of  September  18.  Jay  Cooke  &  Co.  stopped  payment  about  11  a.  m.  of 
that  day,  and  about  1  p.  m.  of  the  same  day  their  failure  was  generally 
known  in  Providence. 

The  draft  was  never  the  property  of  Jay  Cooke  &  Co.,  and  was  never 
credited  by  them  to  the  plaintiff,  but  was  merely  received  by  them  for 
collection. 


118  INDORSEMENT 

Jay  Cooke  &;  Co.  were  owing  the  defendants,  and  the  defendants 
credited  it  in  their  account  with  them,  and  claim  that  they  had  a  right 
so  to  do. 

The  rights  of  parties  to  bills  forwarded  for  collection  have  been  a 
fruitful  source  of  litigation.  Questions  of  this  sort  have  generally 
arisen  where  some  party  becomes  insolvent,  and  the  contention  is  who 
shall  bear  the  loss. 

When  is  the  last  holder  of  paper  sent  for  collection  bound  to  look  be- 
yond the  last  remitter? 

We  are  referred  by  defendants'  counsel  to  one  case  only.  Bank  of 
Metropolis  v.  New  England  Bank,  1  How.  234,  11  L.  Ed.  115.  In  that 
case  a  bank  had  forwarded  for  collection  paper  with  a  general  or  un- 
restricted indorsement  to  another  bank,  which,  with  its  own  similar 
indorsement,  had  sent  it  to  a  third  bank  for  collection.  The  second  or 
intermediate  bank  failed,  and  on  the  day  of  its  failure  notified  the  third 
bank  that  the  paper  was  the  property  of  the  first  bank.  In  a  suit  by 
the  first  against  the  third  bank  to  recover  the  proceeds,'  the  court,  while 
admitting  that  if  it  was  a  case  of  two  banks  acting  as  collecting  agents 
for  each  other,  and  where  no  consideration  was  paid  or  money  ad- 
vanced, the  paper  would  remain  the  property  of  the  sender,  holds  that 
in  this  case  the  third  bank,  which  held  the  paper,  not  having  notice  by 
the  indorsement  or  otherwise  that  the  paper  was  not  the  property  of  the 
second  bank,  had  a  right  to  treat  it  as  theirs,  and  was  not  bound  to 
inquire,  and  that  where  two  banks  dealt  together  in  this  way  for  sev- 
eral years,  kept  an  account  current,  and  mutually  credited  the  collec- 
tions, there  was  a  lien  upon  the  paper  so  transmitted  for  the  balance 
without  regard  to  who  might  be  the  real  owner.  The  first  bank,  by 
indorsing  the  paper  in  such  a  manner  as  to  make  it  appear  prima  facie 
the  property  of  the  failing  bank,  had  no  particular  equity  in  its  favor. 

But  this  came  again  before  the  United  States  Supreme  Court  in 
Bank  of  Metropolis  v.  New  England  Bank,  6  How.  212,  12  L.  Ed. 
409,  where  the  court  lays  down  its  propositions  more  definitely :  That 
if  the  collecting  bank,  at  the  time  of  the  dealings,  had  notice  that  the 
bill  was  not  the  property  of  the  intermediate  remitting  bank,  but  had 
been  merely  sent  by  them  for  collection  as  agent  for  some  other  bank, 
then  the  collecting  bank  had  no  right  to  retain  for  any  balance  due 
from  the  intermediate  bank  which  had  failed.  Even  if  the  collecting 
bank  had  no  notice,  they  could  not  retain  as  against  the  real  owner,  un- 
less credit  had  been  given  to  the  intermediate  remitting  bank,  or  what 
was  equivalent,  balances  suffered  to  remain  to  be  met  by  such  paper; 
but  if  the  latter  was  the  case,  and  they  had  treated  the  intermediate 
bank  as  the  owner,  and  had  no  notice,  then  they  might  retain. 

And  there  are  further  explanations  of  the  decision  in  Wilson  v. 
Smith,  3  How.  763,  769,  11  L.  Ed.  820.  And  see  it  criticised  and  re- 
stricted in  McBride  v.  Farmers'  Bank  of  Salem,  25  Barb.  (N.  Y.)  657, 
661,  which  case  was  affirmed  on  appeal  in  McBride  v.  Farmers'  Bank, 


INDORSEMENTS    RESTRICTIVE    OR    WITHOUT    RECOURSE  IV.) 

26  N.  Y.  450.  See,  also,  Reeves  et  al.  v.  State  Bank,  8  Ohio  St.  465 ; 
Jones  V.  Milliken  &  Son,  41  Pa.  252;  Dickerson  v.  Wason,  54  Barb. 
230,  also  in  47  N.  Y.  439,  7  Am.  Rep.  455.  There  are  some  cases 
going  still  further  in  favor  of  the  original  remitting  bank,  and  allowing 
parol  evidence  to  show  the  fact.  Lawrence  v.  Stonington  Bank,  6 
Conn.  521,  and  cases  there  cited;  Bank  of  Washington  v.  Triplett  & 
Neale,  1  Pet.  25,  7  L.  Ed.  37 ;  Commercial  Bank  of  Clyde  v.  Marine 
Bank,  *42  N.  Y.  337,  also  in  1  Abb.  Dec.  405. 

A  general  indorsement  of  bills  is  prima  facie  evidence  of  property 
in  tlie  indors_ee,  and,  even  where  it  is  subject  to  any  equity  or  trust 
between  former  parties,  may  change  the  legal  property  as  to  bona  fide 
holders  for  value.  Collins  v.  Martin,  1  B.  &  P.  648.  But  even  where 
there  is  a  general  indorsement  of  paper  sent  only  for  collection,  it  will 
still  remain  the  property  of  the  sender  as  to  all  persons  having  notice. 

The  counsel  for  the  plaintiffs  say  that  the  present  case  would  come 
'  under  the  head  of  what  is  in  some  places  denominated  a  "short  entry." 
It  would  seem  that  in  London  it  was  a  custom  (Giles  et  al.  v.  Perkins 
et  al.,  9  East,  12,  and  counsel  arguendo  in  Ex  parte  Thompson,  1  Mont. 
&  Mac.  102,  110)  for  bankers  to  receive  bills  for  collection  and  to  enter 
them  immediately  in  their  customers'  accounts,  but  never  to  carry  out 
the  proceeds  in  the  column  to  their  credit  until  actually  collected ;  and 
this  was  called  a  "short  entry,"  or  "entering  short."  And  such  bills 
always  continued  the  property  of  the  customer,  unless  the  contrary 
was  to  be  inferred  from  some  course  of  dealing.  Whereas  country 
bankers  in  England  generally  credited  to  their  customers  at  once  all 
bills  considered  good,  and  generally  allowed  drafts  upon  the  proceeds. 
And  even  in  the  latter  cases  Lord  Ellenborough  held  such  bills  did  not 
pass  to  the  assignees  in  bankruptcy,  if  there  was  a  balance  in  favor  of 
the  customer  over  and  above  the  bills.  Giles  et  al.  v.  Perkins  et  al., 
9  East,  12 ;  Ex  parte  Harford,  2  Rose,  163.  But  Lord  Eldon  held  that 
where  they  were  with  the  knowledge  of  the  customer  entered  as  cash, 
and  the  customer  was  entitled  to  draw  against  them,  he  could  not  claim 
the  specific  bills.  Ex  parte  Sargeant,  1  Rose,  153  ;  Ex  parte  Thompson, 
1  Mont.  &  Mac.  102  (A.  D.  1828).  But  even  where  the  custom  was  to 
enter  short,  and  it  was  not  done,  this  would  not  change  the  property, 
unless  some  act  of  the  customer  concurred.  Ex  parte  Sargeant,  1 
Rose,  153;  Ex  parte  Pease,  1  Rose,  232;  and  the  Vice  Chancellor's 
opinion  in  Ex  parte  Thompson,  1  Mont.  &  IMac.  102,  112. 

But  besides  the  ground  that  this  was  equivalent  to  a  short  entry, 
and  that  the  cases  decided  upon  that  point  apply  to  it,  it  is  contended 
that  in  this  case  the  eft'ect  of  the  restriction  in  the  indorsement  was  to 
give  to  all  subsequent  holders  express  notice  of  the  trust,  and  we  think 
this  view  of  the  plaintiff's  counsel  is  correct. 

The  indorsee  is  rather  an  agent  of  the  indorser  with  power  of  sub- 
stitution, and  the  bill  is  s'fiH  Th'tlie  possession  of  the  intlorscr  by  his 
agent.     Ex  parte  Sargeant,  1  Rose,  153.     The  very  mode  of  indorse- 


120  INDORSEMENT 

ment  in  this  case  shows  that  it  is  not  a  case  of  ordinary  indorsement, 
and  that  no  consideration  has  been  paid  for  it.  Eadie  &  Laird  v.  E. 
India  Co.,  1  W.  Bla.  295,  also  in  2  Burr.  1216.  The  bill  must  be  taken 
by  the  holder  subject  to  the  trust;  and,  says  Judge  Story  (on  Agency,  § 
211),  if  he  voluntarily  consents  to  or  aids  in  any  other  appropriation  he 
is  responsible;  and  says  Judge  Byles  (on  Bills,  *157),  he  holds  the  bill 
or  money  as  trustee  for  the  restraining  party,  and  is  liable  to  the  party 
making  the  restriction.  The  words  are  notice  that  the  restricted  in- 
dorsee has  no  property  in  the  bill,  that  he  is  a  mere  trustee,  and  that  he 
can  appoint  no  subagent  except  for  the  purpose  of  holding  the  bill  or 
money  on  the  same  trust,  and  if  the  holder  pays  it  to  the  intermediate 
agent  he  becomes  responsible  for  its  misapplication. 

In  the  case  of  Sigourney  v.  Lloyd  et  al.,  8  B.  &  C.  622,  also  in  3 
M.  &  R.  58,  and  in  Dan.  &  LI.  132,  2  Chitty,  Jr.,  on  Bills,  1412,  1439, 
it  was  contended  that  an  indorsement,  "Pay  to  B.  for  my  use,"  was  a 
mere  direction  to  B.  as  to  the  application  of  the  money ;  but  Lord  Ten- 
terden  said  that  if  it  meant  no  more  the  words  were  useless,  as  he 
would  be  so  liable  without  those  words. 

In  that  case  the  payee  indorsed  generally  to  A.  A.,  the  plaintiff,  in- 
dorsed, "Pay  B.  or  order  for  my  use."  The  defendants  discounted 
it  and  applied  it  to  the  credit  of  B.  B.  failed,  and  it  was  held  that  the 
indorsement  was  sufficient  notice  to  prevent  its  transfer  for  the  bene- 
fit of  any  other  person ;  that  all  subsequent  indorsees  were  trustees  for 
the  plaintiff ;  and  that  whoever  advanced  any  money  on  it  did  it  at  his 
peril.  And  on  appeal  this  judgment  was  confirmed  by  the  Exchequer 
Chamber,  the  court  holding  that  the  money  to  whomsoever  paid  was  in 
trust  for  the  indorser.  Lloyd  et  al.  v.  Sigourney,  5  Bing.  525,  also  in 
3  U.  &  P.  229,  and  3  You.  &  Jer.  220,  and  Dan.  &  LI.  213. 

This  custom  of  restricted  indorsing  is  not  of  late  origin,  but  is  spoken 
of  as  usual  in  Snee  et  al.  v.  Prescott  et  al.,  1  Atk.  245,  249  (A.  D.  1743) ; 
the  object  being,  as  there  stated,  to  prevent  the  indorsement  being  filled 
up  in  such  a  manner  as  to  pass  the  interest  in  the  bill. 

If  the  defendants  in  the  present  suit  had  paid  the  cash  to  Jay  Cooke 
before  hearing  of  the  failure,  it  would  have  presented  a  different  ques- 
tion. But  they  had  no  right  to  apply  the  money  of  the  plaintiffs  to 
the  payment  of  a  debt  due  to  them  (the  defendants)  from  Jay  Cooke. 
This  is  not  such  a  payment  as  can  protect  them  against  a  suit  by  the 
plaintiffs,  the  real  owners.  Truettel  v.  Barandon,  2  Chitty,  Jr.,  on 
Bills,  1002,  also  in  8  Taunt.  100,  and  1  Moore,  543 ;  Thompson  v. 
Giles,  2  Chitty,  Jr.,  on  Bills,  1190,  also  in  2  B.  &  C.  422,  and  3  D.  & 
R.  733 ;  Lloyd's  note  to  Paley,  quoted  in  full  in  Story  on  Agency,  § 
228,  note;  1  Bell's  Comm.  *270,  which  work  is  praised  by  Mr.  Warren 
as  being  a  "mine  of  commercial  law." 

Judgment  for  plaintiffs. 


INDORSEMENTS    RESTRICITVE    OR   WITHOUT   RECOURSE  121 

HOOK  V.  PRATT  et  al. 
(Court  of  Appeals  of  New  York,  1879.     78  N.  Y.  371,  34  Am.  Rep.  539.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court,  in  the  Fourth  Judicial  Department,  afhrming-  a  judgment  in 
favor  of  plaintiff,  entered  upon  a  decision  of  the  court  on  trial  with- 
out a  jury  (reported  below,  14  Hun,  396). 

This  action  was  l)rought  by  plaintiff,  as  trustee  of  Charles  H. 
Hook,  against  defendants,  as  executors  of  the  will  of  James  P.  Has- 
kin,  deceased,  upon  a  draft  signed  and  indorsed  by  said  testator,  of 
which  the  following  is  a  copy: 
•'$5,000.  Syracuse,  N.  Y.,  September  13,  1872. 

"Orrin  Welch,  Treasurer  Morris  Run  Coal  Co. :  Pay  to  the  or- 
der of  myself,  one  year  after  date,  five  thousand  dollars,  for  value 
received.  [Signed]     J.  P.  Haskin." 

Indorsed:  "Pay  to  the  order  of  Mrs.  Mary  Hook,  35  King,  for 
the  benefit  of  her  son  Charlie.  [Signed]     J.  P.  Haskin." 

Defendants  waived  demand  upon  the  drawee  and  notice  of  pro- 
test. Upon  the  trial  defendants'  counsel  moved  for  a  nonsuit,  in 
substance,  upon  the  ground  that  the  indorsement  was  restrictive 
and  did  not  import  a  consideration,  but  imported  a  gift.  The  mo- 
tion was  denied  and  said  counsel  excepted. 

It  was  then  admitted  by  plaintiff's  counsel  that  Charles  H.  Hook, 
then^esfui  que  trust,  and  the  "Charlie"  referred  to  in  the  indorse- 
ment, was  a  boy  some  seven  or  eight  years  old  at  the  date  of  the^ 
draft ;  that  he  was  claimed  by  plaintiff"to  be  the  illegitimate  son  of 
defendants'  testator,  which  claim  was  admitted  by  said  Haskin  ; 
that  plaintiff  was  at  the  date  of  said  draft  a  married  woman,  living 
in  the  city  of  Rochester  with  her  husband,  who  is  made  a  party  de- 
fendant, and  was  married  not  long  before  the  draft  was  drawn. 
The  boy  lived  with  her  and  was  taken  care  of  by  her.  A  motion 
was  again  made  for  a  nonsuit,  which  was  denied,  and  defendants' 
counsel  excepted. ° 

Rapallo,  J.  The  point  mainly  relied  upon  by  the  appellant  is  that 
the  draft  and  indorsement  upon  which  this  action  is  brought  do  not 
on  their  face  import  a  consideration.  The  draft  was  drawn  by  the 
defendants'  testator  upon  the  treasurer  of  an  incorporated  com- 
pany, payable  to  the  drawer's  own  order,  and  purported  to  be  for 
value  received.  It  was  indorsed  by  the  drawer  by  a  special  indorse- 
ment, "Pay  to  the  order  of  Mrs.  Mary  Hook,  for  the  benefit  of  her 
son  Charlie."  The  appellant  claims  that  this  is  one  of  those  restric- 
tive indorsements  which  do  not  purport  to  be  made  for  a  considera- 
tion, and  do  not  entitle  the  indorsee  to  maintain  an  action  on  the 
bill,  without  proving  a  consideration. 

«  .Vrsunioiits  of  counsel  and  citations  of  authorities  at  end  of  opinion  are 
omitted. 


122  INDORSEMENT 

As  a  general  rule  an  indorsement  of  a  negotiable  bill  wliicli  pur- 
ports to  pass  the  title  to  the  bill  to  the  indorsee  imports  a  consideration, 
and  the  burden  of  proving  want  of  consideration  rests  upon  the  party 
alleging  it.  The  restrictive  indorsements  which  are  held  to  negative 
the  presumption  of  a  consideration  are  such  as  indicate  that  they  are 
not  intended  to  pass  the  title,  but  merely  to  enable  the  indorsee  to  collect 
for  the  benefit  of  the  indorser,  such  as  indorsements  "for  collection,"  or 
others  showing  that  the  indorser  is  entitled  to  the  proceeds.  These  cre- 
ate merely  an  agency,  and  negative  the  presumption  of  the  transfer  of 
the  bill  to  the  indorsee  for  a  valuable  consideration. 

But  where  the  indorsement  purports  to  pass  the  title  to  the  bill 
therein  from  the  indorser,  and  divest  him  of  all  beneficial  interest,  a 
consideration  for  such  transfer  is  presumed.  All  the  cases  cited  by 
the  counsel  for  the  appellant  rest  upon  these  principles.  The  cita- 
tion from  3  Kent,  Com.  92,  states  the  principle  to  be  that  when  the 
indorsement  is  a  mere  authority  to  receive  the  money  for  the  use  or 
according  to  the  directions  of  the  indorser,  it  is  evidence  that  the 
indorsee  did  not  give  a  valuable  consideration  for  it  and  is  not  the 
absolute  owner.  This  accords  with  the  statement  of  the  principle 
by  Wilmot,  J.,  in  Edie  v.  E.  India  Co.,  2  Burr.  1227.  So  an  indorse- 
ment, "Pay  to  S.  W.  or  order  for  our  use"  (Sigourney  v.  Lloyd,  8  B. 
&  C.  622,  3  Y.  &  J.  220),  was  held  to  create  a  mere  agency,  and  the 
addition  even  of  the  words  "value  received"  to  such  an  indorsement 
has  been  held  not  to  vary  its  efifect  (Wilson  v.  Holmes,  5  Mass.  543, 
4  Am.  Dec.  75).  In  Edie  v.  East  India  Co.,  2  Burr.  1221,  the  exam- 
ples of  restrictive  indorsements  put  by  way  of  illustration  are,  "Pay 
to  my  steward  and  no  other  person,"  or  "Pay  to  my  servant  for  my 
use."  These  show  that  there  was  no  intention  to  pass  the  title  to 
the  bill ;  and  the  same  effect  has  been  given  to  an  indorsement, 
"Pay  to  P.  only."  It  was  held  that  these  words  indicated  that  the 
indorsee  was  agent  only,  and  paid  no  consideration  for  the  bill,  as  a 
purchaser  would  not  have  accepted  such  an  indorsement.  Power  v. 
Finnic,  4  Call  (Va.)  411.  But  an  indorsement  to  one  person  for  the 
use  or  benefit  of  another  affords  no  such  indication.  The  indorser 
parts  with  his  whole  title  to  the  bill,  and  the  presumption  is  that  he 
does  so  for  a  consideration.  The  only  effect  of  such  an  indorse- 
ment, by  way  of  restriction,  is  to  give  notice  of  the  rights  of  the 
beneficiary  named  in  the  indorsement,  and  protect  him  against  a 
misappropriation.  When  a  bill  is  indorsed,  "Pay  to  A.  or  order  for 
the  use  of  B.,"  A.  cannot  pass  the  bill  off  for  his  own  debt,  but  he 
can  by  indorsing  it  transfer  the  title,  and  will  hold  the  proceeds  for 
the  benefit  of  B.,  and  be  accountable  to  him  for  them.  Evans  v. 
Cramlington,  Carth.  5,  affirmed  in  the  Exchequer  Chamber,  2  Vent. 
309.  In  Treuttel  v.  Barandon,  8  Taunt.  100,  cited  by  the  appellant, 
drafts  payable  to  the  drawer's  own  order  were  indorsed  by  him  to 
De  Roure  &  Co.  or  order  "for  the  account  of  Treuttel  &  Wurz."  It 
appeared  that  De  Roure  &  Co.  were  the  agents  of  Treuttel  &  Wurz, 


IRREGULAR   INDORSEMENTS  123 

and  the  latter  were  held  entitled  to  maintain  trover  for  the  drafts 
against  a  party  to  whom  De  Roure  &  Co.  had  pledged  them  for 
their  own  debt.  There  is  nothing  in  this  case  to  sustain  the  propo- 
sition that  a  draft  thus  drawn  and  indorsed  does  not  import  a  con- 
sideration, or  that  the  indorsee  could  not  maintain  an  action  upon 
it  against  the  drawer  and  indorser  without  proving  a  consideration. 
The  effect  of  the  special  indorsement  was  simply  to  give  notice  of 
the  interest  of  Treuttel  &  Wurz,  and  prevent  De  Roure  &  Co.  from 
appropriating  the  drafts  to  their  own  use.  Blaine  v.  Bourne,  11  R. 
I.  119,  2Z  Am.  Dec.  429,  is  to  the  same  point. 

In  the  present  case  the  indorsement  did  not  purport  to  restrain 
the  indorsee  from  negotiating  the  draft,  for  it  was  "Pay  to  the  or- 
der of  Mrs.  Mary  Hook,"  for  the  benefit  of  her  son  Charlie.  She  was 
constituted  trustee  of  her  son  and  held  the  legal  title.  3  Kent,  Com. 
89.  The  indorsement  gave  notice  of  the  trust,  so  that  if  she  had 
passed  it  off  for  her  own  debt,  or  in  any  other  manner  indicating 
that  the  transfer  was  in  violation  of  the  trust,  her  transferee  would 
take  it  subject  to  the  trust,  but  there  was  nothing  reserved  to  the 
drawer  and  indorser.  He  retained  no  interest  in  it.  The  presump- 
tion is  that  the  draft  was  drawn  and  indorsed  by  him  for  a  consider- 
ation received  either  from  the  indorsee  or  the  beneficiary.  If  the 
youth  of  the  beneficiary  should  be  deemed  to  afford  a  presumption 
that  no  consideration  was  paid  by  him,  the  presumption  would  be 
that  it  emanated  from  his  mother. 

The  facts  admitted  on  the  trial  do  not  establish  that  the  consid- 
eration was  UTegal.  They  show  thaFthe  boy  lived  with  his  mother 
and  was  taken  care  of  by  her.  There  is  nothing  illegal  in  an  under- 
taking by  a  putative  father  to  support  his  illegitimate  child,  or  to 
pay  a  sum  of  money  in  consideration  of  such  support  being  fur- 
nished by  another,  though  it  be  the  mother  of  the  child.  If  such  was 
the  consideration  of  this  obligation,  and  it  was  furnished  by  Mrs. 
Hook,  she  was  at  liberty  to  take  it,  payable  to  herself  in  her  own 
right,  or  for  the  benefit  of  her  child.     *     *     * 

Judgment  affirmed. 


IV.  Irregular   Indorsements  ^ 


PHELPS  V.  VISCHER. 

(Court  of  Appeals  of  New  York,  1S72.     50  N.  Y.  69,  10  Am.  Rep.  433.) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court  in 
the  Third  Judicial  Department,  reversing  a  judgment  in  favor  of 
defendant  entered  upon  the  report  of  a  referee  and  ordering  a  new  trial. 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
(h  .  GS. 


124  INDORSEMENT 

The  action  was  brought  upon  a  promissory  note  made  by  Scudder 
&  Redfield,  dated  i\Iay  15,  1867,  payable  to  the  order  of  James  E. 
Brown,  and  before  delivery  to  Brown  indorsed  by  Solomon  Bennet, 
defendant's  testator.  Before  the  note  fell  due  Brown  transferred 
the  note  to  one  Hine,  and  Hine  transferred  it  to  plaintiff  absolutely, 
without  condition,  before  due,  for  value  paid  at  the  time  in  money. 

At  the  time  of  the  transfer  to  the  plaintiff  the  note  had  on  it  the 
following  indorsement  of  Brown  written  above  Bennet's  indorse- 
ment: 

"For  the  purpose  of  making  this  note  negotiable  I  indorse  the 
same,  payable  to  the  order  of  Solomon  Bennet,  without  recourse  to 
me  as  indorser.  James  E.  Brown." 

The  referee  found  "that,  at  the  time  of  such  transfer  to  the  plain- 
tiff, he  knew  nothing  of  any  defense  to  the  note" ;  also,  "that  said 
plaintiff  had  notice,  before  he  purchased  the  note,  that  the  indorse- 
ments made  by  the  said  Brown  upon  the  note  were  made  after  it 
passed  into  the  hands  of  Brown,  with  Bennet's  indorsement  upon 
it,"  and  decided  that  the  plaintiff  could  not  recover. 

Judgment  was  entered,  upon  the  report  of  the  referee,  in  favor  of 
the  defendant.    Further  facts  appear  in  the  opinion.® 

GrovER,  J.  The  order  of  the  General  Term  does  not  state  that  it 
was  made  upon  any  error  of  fact.  It  must,  therefore,  be  assumed  by 
this  court  that  the  judgment  was  reversed  and  a  new  trial  granted 
upon  legal  errors  only.  An  exception  was  taken  by  the  respondent 
to  the  finding  by  the  referee  of  the  fact  that  the  plaintiff  had  notice, 
before  he  purchased  the  note,  that  the  indorsements  made  by  Brown 
upon  the  note  were  made  after  it  had  passed  into  the  hands  of 
Brown  with  Bennet's  indorsement  upon  it.  This  exception  raises 
the  question  in  this  court  whether  there  was  any  evidence  in  sup- 
port of  the  finding.  The  plaintifif,  in  his  testimony,  speaking  of 
these  indorsements,  says:  "I  can't  say  when  they  were  put  on;  it 
was  done — that  is,  both  of  these  instruments  signed  by  Brown — 
during  the  negotiation  of  the  sale  of  the  note  to  me.  Hine  brought 
all  the  notes  to  me  to  sell  them  to  me."  The  witness  has  before 
testified  that  he  purchased  several  other  notes  of  Hine  at  the  same 
time  he  bought  this.  Other  testimony  shows  that  Bennet's  in- 
dorsement was  put  upon  the  note  a  long  time  before  the  purchase 
by  the  plaintiff.  It  follows  that  when  the  plaintiff  first  saw  the 
note  it  had  been  indorsed  by  Bennet  and  not  by  Brown.  This  sus- 
tained the  material  part  of  the  finding.  Whether  the  note  had  been 
in  Brown's  hands  was  not  material;  but,  if  so,  that  fact  might  be 
inferred  from  the  testimony.  This  brings  us  to  the  real  question  in 
the  case,  which  is  whether  the  legal  conclusion  of  the  referee,  from 
the  facts  found,  that  the  plaintiff  was  not  entitled  to  recover  against 
Bennet,  was  correct.     The  substance  of  the  facts  so  found  is  that 

8  The  arguments  of  counsel  are  omitted. 


IRREGULAR   INDORSEMENTS  !-•"• 

Scuddcr  &  Rcdfield  made  the  note  in  suit  payable  to  the  order  of 
James  E.  Brown,  and,  after  being  indorsed  by  the  defendant  Bennet, 
was  by  them  delivered  to  Brown  the  payee;   that  the  note,  before 
maturity,  was  transferred  by  Brown  to  one  Hine,  and  by  Hine,  be- 
fore.iIuc,  transferred  to  the  plaintiff  absolutely,  without  condition 
for _a  valuable  consfderation ;  that  at  thc'time  of  the  transfer  to  the 
plaintiffjie  knew  nothing  of  any  defense  to  the  note;    and  that  it 
then  had  on  it7in  addition  to  the  indorsement  of  Bennet,  the  follow^- 
ing  indorsement,  made  by  Brown,  written  above  the  indorsement  of 
Bennet,  viz.:    "For  the  purpose  of  making  this  note  negotiable  I 
indorse  the  same,  payable  to  the  order  of  Solomon  Bennet,  without 
recourse  to  me  as  indorser;"   and  the  following,  written  below  the 
indorsement  of  Bennet :   "For  value  received  of  Isaac  N.  Hine  I  here- 
by guarantee  to  the  said  Ilinc,  or  bearer,  the  collection  of  the  with- 
in note  of  the  makers,  and  Bennet,  the  indorser,"  signed  by  Brown ; 
that  the  plaintiff  had  notice,  before  he  purchased  the  note,  that  the 
indorsement  made  by  Brown  upon  the  note  was  made  after  it  had 
passed  into  the  hands  of  Brown  with  Bennet's  indorsement  upon  it. 
There  would,  at  first  view,  appear  to  be  an  inconsistency  between 
the  finding  that  the  plaintiff,  at  the  time  of  his  purchase,  knew  of 
no  defense  to  the  note,  and  the  one,  in  substance,  that  he  did,  at 
that  time,  know  that  the  note,  after  being  made  and  indorsed  by 
Bennet,  was,  by  the  maker,  delivered  to  Brown,  who,  after  that, 
made  his  indorsements  upon  the  note,  provided  the  latter  finding 
constituted  a  defense  for  Bennet  upon  the  note,  as  held  by  the  ref- 
eree.   Be  this  as  it  may,  full  effect  must  be  given  to  this  latter  find- 
ing upon  the  same  principle  that  a  general  verdict  is  controlled  by  a 
special  finding  of  fact.    From  this  finding  it  appears  that  the  plain- 
tiff did  know  that  the  note  had  been  indorsed  by  Bennet  before 
Brown  made  the  special  indorsement  thereon. 

This  presents  the  questions  whether  Brown,  had  he  retained  the 
note,  could  have  recovered  against  Bennet  as  indorser;  and  if  not, 
whether  he  could  transfer  any  such  right  to  a  purchaser  from  him. 
In  Herrick  v.  Carman,  12  Johns.  159,  it  was  held  that  the  payee  of 
a  note,  made  payable  to  his  order,  and  indorsed  by  a  third  person 
previous  to  its  delivery  to  the  payee,  could  not  recover  against  such 
indorser;  that  the  face  of  the  paper  showed  that  the  payee  occu- 
pied the  position  of  first  indorser  as  to  the  one  previously  indors- 
ing, and  could  not,  therefore,  be  permitted  to  recover  against  one 
in  the  position  as  to  him  of  second  indorser.  In  Herrick  v.  Car- 
man, 10  Johns.  224,  it  was  held,  upon  a  like  note,  that  the  party  who 
had  so  indorsed  might,  in  an  action  against  him  by  an  indorser  of 
the  payee,  show  that  the  plaintiff  held  the  note  as  agent  of  the 
payee,  and  that  this  fact  would  defeat  a  recovery  for  the  reason 
that  the  payee,  as  to  the  defendant,  stood  in  the  position  of  first  in- 
dorser, and  could  not  therefore  recover  of  him.  In  Tillman  v. 
Wheeler,  17  Johns.  326,  the  same  rule  was  held  and  applied  in  de- 


126  INDORSEMENT 

ciding  the  case.  It  may  be  remarked  that  in  each  of  these  cases  it 
appeared  that  the  payees  received  the  notes  from  the  makers  for 
vahie.  pursuant  to  an  agreement  by  the  maker  to  give  notes  with 
an  indorser;  but  it  was  held  that  this  fact  was  of  no  avail  to  the 
plaintiffs,  unless  it  was  further  proved  that  the  person  indorsing 
did  so  with  intent  to  become  surety  for  the  makers  to  the  payees. 
It  is  clear  that  a  party  having  no  right  of  action  upon  a  note  him- 
self can  transfer  none  to  another  knowing  all  the  facts. 

In  the  present  case  the  plaintiff  not  only  himself  knew  the  facts,  but 
the  case  shows  that  they  were  also  known  to  Hine,  of  whom  he  pur- 
chased the  note.  In'Moore  v.  Cross,  19  N.  Y.  227,  75  Am.  Dec.  326. 
the  doctrine  of  the  above  cases  was  approved ;  and  it  was  further 
held  that  in  case  the  payee  of  a  note,  indorsed  by  a  third  person  be- 
fore delivery  to  him,  averred  and  proved  that  it  was  the  intention  of 
the  indorser  to  become  surety  of  the  maker  to  him  upon  the  note, 
and  that  he  indorsed  the  same  for  that  purpose,  he  could  maintain 
an  action  and  recover  upon  such  indorsement.  There  is  no  intima- 
tion that  the  action  could  be  maintained  in  the  absence  of  such 
proof.  In  Bacon  v.  Burnham,  37  N.  Y.  614,  it  was  held  that  where 
a  person  indorsed  a  note,  payable  to  another  or  order,  the  legal  pre- 
sumption was,  from  the  face  of  the  paper,  that  he  stands  in  the 
position  of  a  subsequent  indorser  to  the  payee,  and  that  in  the  ab- 
sence of  proof,  showing  him  in  a  different  position,  the  payee  could 
not  recover  against  him,  and,  further,  that,  the  payee  having  no 
right  of  action,  none  could  be  acquired  by  transfer  from  him.  This 
is  decisive  of  the  present  case. 

The  counsel  for  the  respondent  invokes  the  rule  that  the  right  of 
a  purchaser  of  negotiable  paper  is  not  impaired  unless  he  has  such 
knowledge  of  the  equities  between  the  original  parties  as  to  make 
his  purchase  dishonest.  It  is  obvious  that  this  does  not  include  de- 
fenses apparent  upon  the  face  of  the  paper,  but  such  only  as  are  de- 
pendent upon  the  proof  of  other  facts.  In  the  present  case  the 
plaintiff  knew  that  Brown  had  not  indorsed  the  paper  without  re- 
course to  Bennet,  but  that  the  latter  had  indorsed  it,  payable  to  the 
order  of  Brown.  The  plaintiff  must  be  assumed  to  have  known 
that,  in  the  absence  of  proof  that  Bennet  indorsed  with  the  inten- 
tion of  becoming  security  for  the  makers  to  Brown,  Brown  could 
maintain  no  action  against  him  upon  the  indorsement,  and,  having 
no  such  right  himself,  could  not  transfer  it  to  another  except  upon 
assuming  the  responsibility  of  first  indorser  as  to  him;  that  the 
transfer  of  the  note  by  Brown  otherwise  was  a  fraud  upon  Bennet. 
Had  the  plaintiff  purchased  the  note  of  Hine  without  the  knowl- 
edge that  Bennett  first  indorsed  the  note,  and  that  Brown's,  indorse- 
ment was  made  thereafter,  the  case  would  have  come  within  the 
rule  insisted  upon  by  counsel.  The  plaintiff,  in  the  absence  of  such 
knowledge,  might  have  supposed  that  Brown  first  specially  indors- 
ed the  note  to  Bennet,  and  that  he  subsequently  indorsed,  and  that 


IRREGULAR    INDORSKMENTS  1-" 

Brown's  guaranty  was  made  still  later,  upon  some  other  arrange- 
ment. Under  such  circumstances  the  plaintiff  would  have  been  a 
bona  fide  holder. 

The  cases  cited  by  counsel,  where  notes,  not  negotiable,  were  in- 
dorsed before  delivery,  have  no  application.  But  in  these  it  was  proved 
that  the  indorsements  were  made  with  the  intention  of  becoming  se- 
curity for  the  makers  to  the  payee.  In  Dean  v.  Hall,  17  Wend.  214, 
where  it  was  held  that  the  indorser  could  only  be  made  liable  when 
properly  charged  as  such,  and  not  as  maker,  the  additional  views  found 
in  the  opinion  are  entirely  predicated  upon  the  assumed  fact  that  the 
indorser  put  his  name  on  the  back  at  the  time  the  note  was  made,  ac- 
cording to  a  promise  to  become  originally  and  directly  responsible,  or 
was  privy  to  the  consideration  of  the  note.  Penny  v.  Innes,  1  Cromp- 
ton,  Neeson  &  Roscoc,  439,  cited  by  counsel,  was  a  case  upon  an  in- 
dorsement of  a  bill  of  exchange,  and  the  indorser  was  held  liable  upon 
the  ground  that  the  indorsement  was  equivalent  to  the  drawing  of  a 
new  bill  by  the  indorser  upon  the  drawee.  If  this  be  so  the  judgment 
was  correct,  as  the  drawer  of  a  bill  is  liable  to  the  payee  unless  it  is 
paid  by  the  drawer,  and  the  proper  steps  are  taken  to  charge  him. 
This  case  has  been  criticised.    See  Gwinnell  v.  Herbert,  5  A.  &  E.  436. 

But  it  is  unnecessary  to  determine  in  this  case  whether  the  point 
was  well  decided  or  not,  as  the  reason  of  the  decision  has  no  application 
to  the  indorsement  of  a  note  payable  to  the  order  of  the  payee.  As  we 
have  seen  already,  the  law  is  settled  in  this  state  that  such  an  indorser 
is  not  liable  to  the  payee  upon  the  face  of  the  paper,  and  can  only  be 
made  so  by  proof,  showing  that  he  indorsed  with  intent  of  becoming 
so  liable.  Bennet  could  not  be  made  liable  as  the  maker  of  a  new  note, 
but  only  as  indorser.'  Hall  v.  Newcomb,  3  Hill,  233;  same  case  in 
error,  7  Hill,~416,  42  Am.  Dec.  82;  Brown  v.  Curtiss,  2  N.  Y.  225. 

The  judge  at  General  Term  fell  into  the  error  of  supposing  that  the 
facts  set  out  in  the  complaint,  bringing  the  case  within  the  principle  of 
Moore  v.  Cross,  were  admitted  in  the  answer.  The  answer  explicitly 
denies  that  the  defendant  Bennet  indorsed  with  intent  to  become  liable 
as  surety  to  the  payee. 

The  order  of  the  General  Term  must  be  reversed,  and  the  judgment 
entered  upon  the  report  of  the  referee  affirmed,  with  costs. 


FAR  ROCKAWAY  BANK  v.  NORTON. 

(Court  of  Appeals  of  New  York,  190G.     1S6  N.  Y.  484,  79  N.  E.  709.) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Second  Judicial  Department,  entered  January  8,  1906, 
affirming  a  judgment  in  favor  of  plaintiff"  entered  upon  the  report  of  a 
referee. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are  stated 
in  the  opinion. 


12S  INDORSEMENT 

CuLLEN,  C.  J.  The  action  is  brought  on  a  promissory  note  made  by 
one  Smith  to  the  plaintiff,  which  the  defendant  indorsed  prior  to  its 
dcHver}^  to  the  payee.    But  two  questions  are  presented  on  this  appeal. 

First.  It  is  alleged  the  referee  committed  error  in  excluding  evidence 
offered  by  the  defendant  to  show  that  Smith,  the  maker,  had,  some  time 
subsequent  to  the  niaturity  of  the  note,  a  sufficient  deposit  in  the  plain- 
tiff bank  to  pay  it,  which  the  plaintiff  failed  to  appropriate  for  that 
purpose.  The  case  of  National  Bank  of  Newburgh  v.  Smith,  66  N.  Y. 
271,  23  Am.  Rep.  48,  is  a  conclusive  authority  to  the  eft'ect  that,  in  the 
absence  of  any  direction  or  agreement  to  that  effect,  it  was  optional 
with  the  plaintiff  whether  it  would  apply  the  money  or  not  upon  the 
note  in  suit,  and  that  it  was  under  no  positive  legal  obligation  to  do  so. 
Therefore  there  was  no  error  committed  in  this  respect. 

Second.  The  note  was  given  in  renewal  and  to  take  up  an  earlier 
note,  also  indorsed  by  the  defendant.  To  establish  the  fact  that  the 
defendant  had  indorsed  the  note  with  the  purpose  of  giving  the  maker 
credit  with  the  payee,  proof  was  given  tending  to  show  that,  default 
having  been  made  in  the  payment  of  the  earlier  note,  notice  of  protest 
thereof  was  given  to  the  defendant.  It  is  urged  that  the  evidence  as 
to  the  protest  of  the  earlier  note  was  not  of  a  proper  character.  It 
is  unnecessary  to  consider  this  question,  for  since  the  enactment  of  the 
negotiable  instruments  law  (Laws  1897,  p.  719,  c.  612)  the  law  obtain- 
ing in  the  case  of  such  indorsement  as  that  made  by  the  defendant 
has  been  radically  changed.  Prior  to  that  time  the  indorser  was  pre- 
sumed to  be  a  second  indorser,  and  not  liable  to  the  payee,  though  it 
was  competent  for  the  payee  to  prove  aliunde  that  the  intention  of  the 
indorser  was  to  give  the  maker  credit  with  the  payee.  Bacon  v.  Burn- 
ham,  37  N.  Y.  614;  Coulter  v.  Richmond,  59  N.  Y.  478.  Section  114 
of  the  negotiable  instruments  law  prescribes  a  different  rule.  It  is 
enacted  that  "where  a  person,  not  otherwise  a  party  to  an  instrument, 
places  thereon  his  signature  in  blank  before  delivery,  he  is  liable  as  in- 
dorser in  accordance  with  the  following  rules:  "(1)  If  the  instrument 
is  payable  to  the  order  of  a  third  person,  he  is  liable  to  the  payee  and 
to  all  subsequent  parties."  This  note  was  made  in  December,  1898. 
and  therefore  the  proof  offered  by  the  plaintiff  was  not  necessary  to 
maintain  its  cause  of  action,  and  the  error,  if  error  there  was,  was  im- 
material. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 


KATDKE    AND   LIABILITIES    OF   PARTIES  129 


NATURE  AND  LIABILITIES  OF  PARTIES 
I.  Acceptor  and  Maker  * 


FARMERS'  NAT.  BANK  OF  ANNAPOLIS  v.  VENNER  et  al. 
VENNER  V.  FARMERS'  NAT.  BANK  OF  ANNAPOLIS. 

(Supreme  Judicial  Court  of  Massacbusett.s,  Suffolk,  1906.     192  Mass.  531,  78 

N.  E.  540,  7  Aun.  Cas.  GOO.) 

Morton,  J.  These  two  actions  were  tried  together  before  a  judge 
of  the  superior  court  sitting  without  a  jury.  The  first  is  ari  action  of 
contract  by  the  plaintiff  bank,_as  the  holder  of  a  certain  promissory 
ngifi^ag'anisT  Iht  cfefendarlts  as  makers,  to  recover  the  balance_allcged 
to  he  due  after  thesale^  and  apfdicatlpn  of  the  collateral.  The  note^Ts 
dated  "New^^York  City,  May  14,  1892,"  and  is  payable  on  demand 
after  date  to  the  order  of  the  makers  at  the  office  of  Wilson,  Colston  & 
Co.,  Baltimore,  and  is  indorsed  by  the  defendants.  The  writ  is  dated 
May  13,  1898,  the  last  day  before  the  action  would  have  been  barred  by 
the  statute  of  limitations.  The  plaintiff  is  a  banking  association  or- 
ganized under  the  laws  of  the  United  States  and  having  its  usual  place 
of  business  at  Annapolis  in  the  state  of  Maryland.  The  defendants 
formerly  were  copartners  doing  business  in  New  York  City  under  the 
name  of  C.  H.  Venner  &  Co.  Personal  service  was  made  in  this  state 
on  the  defendant  Venner,  but  no  service  was  made  on  either  of  the 
other  two  defendants.  The  firm  of  C.  H.  Venner  &  Co.  was  dissolved 
July  31,  1892,  and  the  assets  became  the  sole  property  of  the  defendant 
Venner, 

The  second  action  is  tort  for  the  alleged  conversion  of  $26,000,  par 
value,  bonds  of  the  American  Waterworks  of  Omaha,  Neb.,  pledged  as 
collateral  to  secure  the  payment  of  the  above  note.  The  note  provided, 
amongst  other  things,  that  the  holder  might  sell  the  collateral  or  any 
part  thereof  on  nonperformance  of  his  promise  by  the  maker  "in  such 
manner  as  the  holder  hereof  may  deem  proper  without  notice  at  any 
stock  exchange  or  at  public  or  private  sale  at  the  option  of  the  holder 
hereof,  and  with  the  right  on  the  part  of  the  holder  hereof  to  become 
purchaser  thereof  at  such  sale."  It  also  contained  a  provision  that  "in 
case  of  depreciation  in  the  market  value  of  the  security  hereby  jiledged 
*  *  *  a  payment  is  to  be  made  on  account  or  additional  approved 
security  given  upon  demand,  so  that  the  market  value  of  the  security 
shall  always  be  at  least  ten  (10)  per  cent,  more  than  the  amount  unpaid 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
69-71. 

^tooEE  Cases  B.&  N.— 9 


130  NATURE   AND  LIABILITIES   OF  PARTIES 

on  this  note.  In  case  of  failure  to  do  so  this  note  shall  be  deemed  to 
be  due  and  payable  forthwith  *  *  *  and  the  holder  hereof  may 
immediately  reimburse  himself  by  a  sale  of  the  security  in  the  manner 
provided  for  above."  The  note  is  signed  "C.  H.  Venner  &  Co."  and 
the  words  "Due  on  demand"  immediately  precede  the  signature. 

There  was  evidence  tending  to  show,  or  from  which  it  could  have 
been  found,  that  the  note  andjDonds  were  presented  to  the  defendant 
Venn^f 'In  person  at  his  office  in  New  York  City  and  a  demand  for 
payment  was  made.  There  also  was  evidence  that  a  demand  was  made 
upon  him  for  the  payment  of  $5,000  on  account,  and  for  additional 
collateral  under  circumstances  which  justified  the  latter  according  to  the 
terms  of  the  note.  Neither  of  the  demands  thus  made  was  complied 
with.  There  was  no  evidence  of  a  presentment  or  demand  at  the  office 
of  Wilson,  Colston  &  Co.  in  Baltimore,  or  that  there  were  funds  there 
to  meet  the  note  if  it  had  been  presented.  The  collateral  was  sold 
through  the  firm  of  A.  H.  Muller  &  Son  in  New  York  City  and  was 
bid  in  for  the  bank  at  a  price,  except  as  to  one  bond,  very  much  less, 
as  there  was  testimony  tending  to  show,  than  other  bonds  of  the  same 
issue  were  sold  for  before  and  after  the  sale  in  question.  This  con- 
stitutes the  conversion  complained  of.  It  is  conceded,  or,  at  least,  is 
stated  in  the  bill  of  exceptions  as  a  fact,  that  A.  H.  IMuller  and  Son 
were  proper  auctioneers,  and  that  the  place  where  the  bonds  were  sold 
was  a  proper  place  to  sell  them. 

The  judge  found  for  the  plaintiff  in  the  first  action  in  the  sum  of 
$24,865.26,  and  for  the  defendant  in  the  second  action.^  The  cases 
are  here  on  exceptions  by  the  defendant  Venner  to  the  refusal  of  the 
judge  to  give  certain  rulings  requested  by  him  and  to  the  finding  that 
was  made. 

We  see  no  error  in  the  rulings  or  refusals  to  rule,  or  in  the  finding 
that  was  made. 

The  defendant  Venner  contends  in  the  first  place  that  no  action  can 
be  maintained  on  the  note  because  no  demand  was  made  for  its  pay- 
ment at  the  office  of  Wilson,  Colston  &  Co.,  in  Baltimore.  It  is  set- 
tled in  this  state  both  at  common  law  and  recently  by  statute  and  by 
the  weight  of  authority  in  this  country,  contrary  to  the  law  in  England, 
that,  where  a  note  or  bill  of  exchange  is  payable  at  a  particular  time 
and  place,  no  demand  or  presentment  at  the  place  named  Ts  necessary 
in  order  to  entitle  the  holder  to  maintain  an  action  upon  the  note  or 
bill  against  the  maker  or  acceptor.  Ruggles  v.  Patten,  8  Mass.  480; 
Carley  v.  Vance,  17  Mass.  389;  Payson  v.  Whitcomb,  15  Pick.  212; 
Wright  V.  Vermont  Life  Ins.  Co.,  164  Mass.  302,  41  N.  E.  303.  Rev. 
Laws,  c.  73,  §  87.  For  a  collection  of  cases  see  1  Dan.  Neg.  Inst.  (3d 
Ed.)  643;  1  Pars.  Notes  and  Bills  (1st  Ed.)  p.  305  et  seq. ;  4  Am.  & 
Eng.  Ency.  of  Law  (2d  Ed.)  ZIZ.  We  see  no  valid  distinction  between 
a  note  payable  on  time  at  a  particular  place  and  a  note  payable  on  de- 

2  That  part  of  the  opinion  relating  to  the  second  action  is  omitted. 


ACCEPTOR   AND   MAKER  131 

mand  at  a  particular  place.  No  demand  is  necessary,  before  suit,  where 
a  note  is  payable  generally  on  demand.  And  as  we  have  seen  no  de- 
mand is  necessary  when  a  note  is  payable  on  time  at  a  particular  place. 
It  seems  to  us  that  the  fact  that  both  circumstances  are  found  in  the 
same  note  cannot  operate  to  change  the  rule  and  render  a  demand  nec- 
essary when  it  would  not  otherwise  be  required.  McKenney  v.  Whip- 
ple, 21  Me.  98;  Gammon  v.  Everett,  25  Me.  66,  43  Am.  Dec.  255; 
Haxtun  v.  Bishop,  3  Wend.  (N.  Y.)  13 ;  Montgomery  v.  Elliott,  6  Ala. 
701 ;  Dougherty  v.  Western  Bank,  13  Ga.  287;  Bowie  v.  Duvall,  1  Gill 
&  J.  (Md.)  175. 

We  think,  therefore,  that  the  refusal  of  the  judge  to  rule  as  re- 
quested, that  in  order  to  maintaiu  the  action  the  plaintiff  was  bound 
to  prove  a  demand  at  the  office  of  Wilson,  Colston  &  Co.  and  that  a 
refusal  of  a  demand  to  pay  the  note  at  any  other  place  did  not  consti- 
tute a  default  in  the  payment  of  the  note,  was  correct,  and  that  the 
judge  was  right  in  ruling,  as  he  did,  that  a  sufficiejit  demand  was  made 
though  nol  made  at  the  office  of  Wilson,  Colston  &  Co.  in  Baltimore. 
The  note  is  dated  and  apparently  was  made  in  New  York.  But  it  was 
given  in  renewal  of  a  note  previously  held  by  Wilson,  Colston  &  Co. 
and  was  to  be  paid  in  Baltimore,  and,  it  fairly  may  be  inferred,  was 
delivered  to  the  plaintiff  bank  at  its  usual  place  of  business  in  Annap- 
olis. It  must  be  regarded,  therefore,  either  as  a  New  York  or  Mary- 
land contract.  If  it  is  to  be  regarded  as  a  Maryland  contract  then  the 
decisions  by  the  highest  court  in  that  state  which  were  put  in  by  the 
plaintiff  bank  would  seem  to  show,  so  far  as  they  bear  upon  the  ques- 
tion, that  a  demand  at  the  office  of  Wilson,  Colston  &  Co.  was  not  nec- 
essary in  order  to  enable  the  plaintiff  to  maintain  its  action.  Bowie  v. 
Duvall,  1  Gill  &  J.  (Md.)  175.  No  evidence  was  introduced  as  to  the 
law  of  New  York  and  in  the  absence  of  such  evidence  it  is  to  be  as- 
sumed that  the  law  of  that  state  is  the  same  as  the  law  of  this.  Hazen 
v.  Mathews,  184  Mass.  388,  68  N.  E.  838.     *     *     * 

Exceptions  overruled. 


NATIONAL  PARK  BANK  OF  NEW  YORK  v.  NINTH  NAT. 

BANK  OF  NEW  YORK. 

SAME  v.  FOURTH  NAT.  BANK  OF  NEW  YORK. 

(Court  of  Appeals  of  New  York,  1S71.     46  N.  Y.  77.) 

The  first  case  is  an  appeal  from  judgment  of  the  late  General  Term, 
of  the  First  judicial  district,  reversing  order  of  Special  Term  sustain- 
ing a  demurrer  to  complaint,  and  also  judgment  entered  upon  said 
order. 

The  last  is  an  appeal  from  judgment  of  General  Term,  New  York 
Common  Pleas,  affirming  judgment  of  Special  Term  of  that  court  over- 
ruling demurrer  to  complaint. 


132  IIATUEE   AND   LIABILITIES    OF   PARTIES 

The  complaint  in  the  first  case  states,  in  substance :  That  on  the  25th 
of  March,  1867,  the  Ridgely  National  Bank,  of  Springfield,  Illinois, 
drew  its  draft,  or  bill  of  exchange,  on  plaintifif,  for  the  sum  of  fourteen 
dollars  and  twenty  cents,  payable  to  the  order  of  Ely  Shirly,  and  de- 
livered the  same  to  the  payee.  That  afterward  the  amount  of  said 
draft  was  fraudulently  changed  to  $6,300,  and  the  name  of  the  payee 
to  E.  G.  Fanchon,  Esq.  That  the  name  of  Wm.  Ridgely,  cashier,  signed 
to  said  draft,  was  erased,  and  afterward  rewritten  by  the  person  mak- 
ing the  erasure.  That  the  same  was  then  discounted  by  the  Lexington 
National  Bank,  and  by  it  was  endorsed  to  defendant.  That  afterward, 
and  on  or  about  April  12th,  1867,  defendant  presented  said  draft  to 
plaintiff,  and  said  plaintiff  paid  thereon  the  sum  of  $6,300.  That 
•plaintiff  discovered  the  forgery  May  10th,  1867,  and  forthwith  notified 
defendant  thereof,  and  demanded  repayment  of  said  sum,  less  fourteen 
dollars  and  twenty  cents,  which  was  refused.  Defendant  demurs,  "that 
the  complaint  does  not  state  facts  sufficient  to  constitute  a  cause  of 
action." 

In  the  last  case  the  facts  are  similar,  save  as  to  amount  and  names. 

Allen,  J.  The  checks  paid  by  the  plaintiff's,  the  drawee^Sj^  were^for- 
geries^throughout,  as  welTthe  signatures,  as  the  bodies. 

The  name  of  the  signer,  the  cashier  of  the  Ridgely  Bank,  was  not 
the  genuine  signature  of  that  officer,  and  was  not  written  by  his  au- 
thority. The  fact  that  a  genuine  check  had  been  drawn,  and  signed 
by  the  proper  party,  upon  the  same  piece  of  paper,  does  not  affect  the 
character  of  the  instrument  in  its  altered  and  forged  condition.  The 
forger,  by  skillfully  obliterating  the  genuine  signature,  together  with 
the  words  and  figures  indicating  the  amount  payable  thereon,  effectu- 
ally destroyed  the  instrument,  and  it  was  incapable  of  being  restored 
to  its  original  condition,  in  the  form  of  a  check,  and  made  available 
for  any  purpose. 

It  was  but  a  blank  form  of  a  draft  or  bill,  and  the  act  of  signing  the 
narne  of  the  cashier  as  drawer,  with  intent  to  utter  and  pass  the  same 
as  genuine,  was  a  crime,  and  the  signature  a  forgery,  whether  the_ 
check  was  for  the  same  or  a  different  amount  from  that  for  which 
the  original  and  genuine  bill  had  been  drawn. 

Whether  the  forger  used  the  same  paper  on  which  the  original  in- 
strument had  been  written  and  signed,  and  manipulated  it  to  suit  his 
purposes,  or  made  and  forged  a  check  on  another  and  different  piece  of 
paper,  is  not  material,  so  long  as  the  signature  of  the  drawer  was  coun- 
terfeit. 

The  drafts  paid  by  the  plaintiff  were  not  merely  raised  checks,  that 
4s,  forged  and  altered  by  the  obliteration  and  removal  of  one  sum,  and 
the  insertion  of  another,  but  were  forged  instruments  in  every  sense. 

The  drafts  signed  by  the  cashier  are  not  in  existence  in  any  form  as 
drafts.  The  genuine  signature  was  wanting,  to  make  the  instruments 
the  checks  of  the  nominal  drawer,  for  any  amount.    The  money  was 


ACCEPTOR  AND  MAKER 


too 


then  paid  by  the  plaintiff  upon  bills  drawn  upon  it,  to  which  the  name 
of  its  correspondent  had  been  forged. 

For  more  than  a  century  it  had  been  held  and  decided,  without  ques- 
tion, that  it  is  incumbent  upon  the  drawee  of  a  bill,  to  be  satisfied  that 
the  signature  of  the  drawer  is  genuine,  that  he  is  p'resum'eT'tb'Tchow 
the  handwriting  of  his  correspondent;  and  if  he  accepts  or  pays  a  bill 
to  which  the_drawer's  name  has  been  forged,  he  Is  bound  by  the  act, 
and  can  neither  repudiate  the  acceptance  nor  recover  the  money. paid. 
The  doctrine  was  broached  by  Lord  Raymond  in  Jenys  v.  Fawler,  2 
Strange,  946,  the  Chief  Justice  strongly  inclining  to  the  opinion,  that 
even  actual  proof  of  forgery  of  the  name  of  the  drawer,  would  not 
excuse  the  defendants  against  their  acceptance.     In  1762  the  principle 
was  flatly  and  distinctly  decided  by  the  Court  of  King's  Bench,  in  the 
leading  case  of  Price  v.  Neal,  3  Burrows,  1354,  which  was  an  action 
to  recover  money,  paid  by  the  drawee  to  the  holder  of  a. forged  bill. 
Lord  Mansfield  stopped  the  counsel  for  the  defendant,  saying'  that  it 
was  one  of  those  cases,  that  never  could  be  made  plainer  by  argument ; 
that  it  was  incumbent  on  the  plaintiff  to  be  satisfied  that  t]iej)ill  drawn 
upon  him  was  the  drawer's  hand,  before  he  accepted  and  joaid  it,  but  ^ 
JT  was  n.>t  incumbent  for  the  defendant  to  inquire  into  it.     This  case 
has  been  followed  and  the  doctrine  applied,  almost  without  question  or 
criticism,  in  an  unbroken  series  of  cases,  from  that  time  to  this,  and  it 
has  been  distinctly  approved  in  very  many  cases,  which  have  not  been 
within  the  precise  range  of  the  principle  decided.     See  Archer  v.  Bank 
of  England,  2  Doug.  639 ;   Smith  v.  Mercer,  6  Taunt.  76 ;  Wilkinson  v. 
Johnson,  3  B.  &  C.  428 ;   Cook  v.  Masterman,  7  B.  &  C.  902 ;   Cooper 
V.  Meyer,  10  B.  &  C.  468 ;    Saunderson  v.  Coleman,  4  M.  &  G.  209 ; 
Smith  V.  Chester,  1  D.  &  E.  R.  655;   Bass  V.  Clive,  4  M.  &  S.  15; 
Bank  of  Commerce  v.  Union  Bank,  3  N.  Y.  230;    Goddard  v.  Mer- 
chants' Bank,  4  N.  Y.  149 ;  Canal  Bank  v.  Bank  of  Albany,  1  Hill,  287. 
Cases  have  been  distinguished  from  Price  v.  Neal,  and  its  applica- 
bility to  a  transfer  of  a  forged  instrument,  between  per^'iii.  nr.t  i^arties 
to  it,  has  not  been  extended  to  forgeries  of  indorscnienls  ur  hanawrit- 
ing  ofjpartics  to  negotiable  instruments,  other  than  the  drawer.     But, 
as  applied  to  the  case  of  a  bill  to  which  the  signature  of  the  drawer  is 
forged,  accepted  or  paid  by  the  drawee,  its  authority  has  been  uni- 
formly and  fully  sustained,  and  the  rule  extends  as  well  to  the  case  of 
a  bill  paid  upon  presentment,  as  to  one  accepted  and  afterward  paid. 
Bank  of  St.  Albans  v.  Farmers'  &  Mechanics'  Bank,  10  Vt.  141,  33 
Am.  Dec.  188;   Levy  v.  Bank  of  United  States,  4  Dall.  234,  1  L.  Ed. 
814;  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333,  6  L. 
Ed.  334;  Young  v.  Adams,  6  Mass.  182;   Gloucester  Bank  v.  Bank  of 
Salem,  17  Mass.  41. 

A  rule  so  well  established,  and  so  firmly  rooted  and  grounded  in  the 

jurisprudence  of  the  country,  ought  not  to  be  overruled  or  disregarded. 

It  has  become  a  rule  of  right  and  of  action  among  commercial  and 


134  NATURE    AND   LIABILITIES    OF   PARTIES 

business  men,  and  any  interference  Avith  it  would  be  mischievous. 
Judge  Ruggles  in  Goddard  v.  Merchants'  Bank,  supra,  well  says,  "It 
should  not  be  departed  from,  or  frittered  away  by  exceptions  resting 
on  slight  grounds,  and  cannot  be  overruled,  without  overthrowing  valu- 
able, and  well  settled  principles  of  commercial  law."  In  the  first  above 
entitled  action,  the  judgment  of  the  General  Term  should  be  reversed, 
and  that  of  Special  Term  affirmed,  and  judgment  absolute  for  the  de- 
fendant with  costs;  and  in  the  other,  the  judgment  of  the  General  and 
Special  Term  should  be  reversed,  and  judgment  for  the  defendant  with 
costs.    All  concur. 


II.  Drawer  and  Indorser  ' 


HANNUM  V.  RICHARDSON. 
(Supreme  Court  of  Vermont,  1S75.    48  Vt.  508,  21  Am.  Rep.  1.52.) 
Assumpsit  for  false  warranty  of  a  promissory  note.    Plea,  the  general 
issue,  and  trial  by  jury,  December  Term,  1874,  Barrett,  J.,  presiding. 
Said  note  was  for  $58,  dated  Aug.  6,  1870,  payable  to  the  order  of 
one  Mcintosh  &  Co.  30  days  after  date,  signed  by  one  Lincoln,  indorsed 
by  the  payees  to  defendant,  and  by  defendant  to  plaintiff  without  re- 
course to  the  payees  or  the  defendant.    Plaintiff  gave  evidence  that  he 
bought  said  note  of  defendant  on  Jan.  26,  1873,  and  gave  valuable 
consideration  therefor,  which  was  not  denied;    that  defendant  war^ 
ranted  the  note  valid,  and  not  subject  to  defence  by  the  maker;    that 
when  defendant  indorsed  the  note  without  recourse,  plaintiff  asked  him 
if  that  would  have  any  effect  to  vary  his  agreement  as  to  the  validity  of 
the  note,  and  that  defendant  said  it  would  not,  but  would  only  show 
that  he  was  not  liable  for  the  maker's  pecuniary  responsibility;    that 
relying  upon  defendant's  statement,  and  supposing  it  to  be  true,  plain- 
tiff took  the  note ;  that  plaintiff  subsequently  ascertained  that  the  note 
was  given  for  intoxicating  liquor  sold  in  this  state  in  violation  of  law, 
and  consequently  void,  and  that  defendant  knew  it  was  so  given  when 
he  negotiated  it  to  plaintiff.    Defendant  denied  the  warranty,  and  in- 
sisted that  his  indorsement  disclosed  the  true  contract  between  him  and 
the  plaintiff.     Defendant  claimed  that  the  legal  effect  of  his  indorse- 
ment could  not  be  varied  by  parol  evidence  ;  but  the  court  held  that  the 
evidence  was  admissible  to  show  the  understanding  and  intention  of 
the  parties  as  to  the  operation  and  effect  of  the  indorsement — that  the 
indorsement  was  not  conclusive  of  its  legal  effect  in  such  sense  as  to 
exclude  evidence  aliunde;    to  which  defendant  excepted.     The  court 
submitted  to  the  jury  to  find  whether  defendant  warranted  the  note 

3  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§ 
74-79. 


DRAWER   AND   INDORSEE  1^^ 

valid.  Verdict  for  plaintiff.  Defendant  filed  a  motion  in  arrest  of 
judgment,  which  was  overruled,  and  he  excepted.  He  also  filed  a  mo- 
tion to  set  aside  the  verdict  as  against  evidence,  which  was  overruled 
after  hearing,  to  which  he  excepted. 

Pii^RPOixT,  C.  J.  It  may  be  observed  in  the  outset,  that  this  action 
is  not  brought  b^^  the  plaintiff  as  the  indorsee  of  the  note  referred  to 
against  the  defendant  as  the  indorser,  and  the  action  is  not  based  upon 
the  indorsement,  but  is  brought  upon  an  alleged  warranty  by  the  defend- 
ant that  the  note  was  a  valid  and  binding  note,  based  upon  a  valid  and 
lawful  consideration,  when  in  fact  it  was  given  for  an  illegal  considera- 
tion, and  was  at  its  inception  void.  On  trial  the  plaintiff  introduced  evi- 
dence in  support  of  his  declaration.  After  the  evidence  was  in  the  de- 
fendant insisted  that  as  it  appeared  from  the  note  that  it  was  indorsed 
by  the  defendant  "without  recourse,"  the  legal  effect  of  the  indorsement 
could  not  be  varied  or  controlled  by  evidence  outside  of  the  indorsement 
itself — that  the  same  was  conclusive  in  that  respect;  but  the  court  held 
that  such  indorsement  was  not  of  itself  conclusive  of  its  legal  effect  in 
such  sense~as  to  exclude  the  evidence  aliunde ;  and  submitted  the  case  to 
the  jury  in  accordance  with  such  ruling,  and  it  is  upon  this  decision  and 
the_charge  of  the  court  in  respect  to'it,  that  the  only  question  that  has 
been  raised  and  discussed  by  the  "defendant's  counsel  arises. 

What  would  have  been  the  effect  of  this  objection  if  the  action  had 
been  based  upon  the  indorsement,  it  is  not  necessary  now  to  inquire. 
By  indorsing  the  note  "without  recourse,"  the  defendant  refused  to 
assume  the  responsibility  and  lialulity  which  the  law  attaches  to  an  un- 
qualified indorsement,'  so  that' in  respect  to  such  liability,  it  may  perhaps 
be  regarded  as  standing  without  an  indorsement.    If  it  be  so  regarded, 
then  in  what  position  do  these  parties  stand  in  respect  to  the  transac- 
tion?    The  principle  is  well  settled,  that  where  personal  property  of 
any  kind  is  sold,  there  is  on  the  part  of  the  seller  an  implied  warranty 
that  he  has  title  to  the  property,  and  that  it  is  what  it  purports  to  be, 
and  is  that  for  w^hich  it  was  sold,  as  understood  by  the  parties  at  the 
time;    and  in  such  case,  knowledge  on  the  part  of  the  seller  is  not 
necessary  to  his  liability.    The  implied  warranty  is,  in  this  respect,  like 
an  express  warranty,  the  scienter  need  not  be  alleged  or  proved.    Ed- 
wards, in  his  work  on  Bills  and  Promissory  Notes,  p.  188,  says :  "One 
wdio  transfers  a  negotiable  instrument  by  delivery  or  by  indorsement, 
impliedly  guarantees  that  it  is  genuine,  and  that  he  has  title  to  it.    The 
rule  is  the  same,  in  regard  to  personal  property.    The  vendor  of  a  chat- 
tel always  gives  an  implied  warranty  of  the  title.     [Herrick  v.  W'hit- 
"n^l5  Johns.  [N.  Y.]  240;    [Murray  v.  Judah]  6  Cow.  [N.  Y.]  484; 
[Tuller  V.  Davis]   4  Duer  (N.  Y.)  191 ;     [Heermance  v.  Vernoy]   6 
Johns.  [N.  Y.]  5.    Though  the  indorser  transfers  the  note  upon  con- 
dition that  it  is  to  be  collected  at  the  risk  of  the  indorsee,  he  is,  never- 
theless, responsible  if  the  note  proves  to  be  a  forgery."    Edwards,  p. 
289. 


136  NATURE   AND  LIABILITIES   OF  PARTIES 

In  this  case^the  note  in  question  was  given  for  intoxicating  liqifor 
sold  in  this  state  in  violation  of  law,  and  therefore  was  void  at  its  in- 
ception; in  short,  it  was  not  a  note,  it  was  not  what  it  imported  to  be, 
or  what  it  was  sold  and  purchased  for;  it  is  of  no  more  effect  than 
if  it  had  been  a  blank  piece  of  paperfor  which  the~pTamtiff  had  paid 
his  fifty  dollars.  In  this  view  of  the  case  we  think  the  defendant 
is  liable  upon  a  warranty  that  the  thing  sold  was  a  valid  note  of  hand. 

The  plaintiff  has  declared  as  upon  an  express  warranty.  If  he  could 
prove  one,  very  well;  if  he  could  not,  the  implied  warranty  is  just  as 
available  to  him,  the  declaration  being  according  to  its  legal  effect. 

This  view  of  the  case  relieves  it  from  all  embarrassment  growing 
out  of  the  question  as  to  the  admissibility  of  parol  testimony  to  vary 
the  indorsement,  as  the  effect  of  the  indorsement  is  really  not  involved 
in  the  case.  And  the  ruling  and  charge  of  the  court  were  really  more 
favorable  to  the  defendant  than  he  had  the  right  to  ask. 

The  exceptions  to  the  overruling  of  the  motion  in  arrest  were  waived. 
The  exceptions  to  the  refusal  to  set  aside  the  verdict  as  against  the 
evidence,  this  court  refuses  to  hear,  the  decision  of  the  County  Court 
being  conclusive  in  such  cases. 

Judgment  affirmed. 


III.  Accommodation  Parties  * 


THOMPSON  V.  CLUBLEY. 

(Court  of  Exchequer,  1836.     1  Mees.  &  W.  212.) 

Assumpsit  by  the  indorsee  against  the  acceptor  of  a  bill  of  exchange 
for  i200.  drawn  by  one  H.  R.,  payable  to  his  own  order,  and  by  him 
indorsed  to  the  plaintiff. 

Plea :  That  the  bill  of  exchange  was  wholly  made  by  H.  R.,  at  the 
request  and  for  and  by  way  of  accommodation  of  and  for  the  plaintiff, 
and  was  accepted  by  the  defendant,  at  the  request  of  H.  R.,  for  and  by 
way  of  like  accommodation  of  and  for  the  plaintiff,  and  that  at  the  time 
of  making  and  accepting  the  said  bill  of  exchange  it  was  expressly 
agreed,  by  and  between  the  said  parties,  that  if  the  said  bill  of  exchange 
should  happen  to  be  outstanding  at  the  time  when  it  became  due,  it 
should  be  taken  up  and  paid  by  the  plaintiff,  and  that  no  claim  or  de- 
mand should  at  any  time  be  made  against  the  defendant  or  H.  R.,  upon 
or  in  respect  of  it — concluding  with  a  verification. 

Replication :  That  before  and  at  the  time  of  the  commencement  of 
the  suit  the  plaintiff  was,  and  still  is,  the  holder  of  the  said  bill  of  ex- 
change for  good  and  sufficient  consideration,  in  respect  of  his  being  the 

4  For  discussion  of  principles,  see  Korton  on  Bills  and  Notes  (4tli  Ed.)  §§ 
81-83. 


ACCOMMODATION   PARTIES 


131 


holder  thereof;  without  this,  that  the  said  bill  was  either  made  or  ac- 
cepted by  way  of  accommodation  of  or  for  the  plaimiff,  or  that  it  was 
agreed  by  or  between  the  parties,  in  manner  and  form  as  the  defendant 
has  above  in  the  same  plea  in  that  behalf  alleged— concluding  to  the 
country. 

The  case  came  on  for  trial  at  the  sittings  after  Easter  term,  before 
Lord  Abinger,  C.  B.,  when  the  defendant,  in  support  of  his  plea,  called 
H.  R.,  who  stated  that  in  the  spring  of  1833  he  had  occasion  to  raise 
money,  and  having  applied  to  an  attorney  to  assist  him,  it  was  arranged 
between  him  and  the  plaintiff  that  the  witness  should  give  him  the  bill 
on  which  the  present  action  was  brought,  but  which  should  be  taken 
up  by  the  plaintiff,  and  that  witness  should  receive  bills  of  hke  value 
from  the  plaintiff,  for  which  witness  was  to  provide,  and  that  the  de- 
fendant had  not  received  any  value  for  his  acceptance.  It  was  ob- 
jected, on  the  part  of  the  plaintiff,  that  this  evidence  was  inadmissible, 
as  it  went  to  contradict  the  written  contract  of  acceptance,  which  pur- 
ported to  be  an  absolute  engagement  to  pay  the  bill ;  whereas  it  was 
proposed  to  show  that  the  acceptor  was-  not  to  pay  it,  but  that  the  plain- 
tiff, who  was  the  indorsee,  was  to  take  it  up,  and  not  to  sue  the  ac- 
ceptor, the  effect  of  which  was  to  make  an  entirely  different  contract. 
Foster  v.  Jolly,  1  C,  M.  &  R.  709,  was  relied  upon  as  in  point,  but  the 
objection  was  overruled.  It  was  then  contended  that  the  exchange  of 
bills  between  the  plaintiff  and  H.  R.,  the  drawer  and  indorser,  was  suffi- 
cient consideration  to  entitle  the  plaintiff  to  sue  the  acceptor  of  the 
present  bill.  The  learned  judge,  however,  said  that,  in  his  opinion,  this 
bill  had  really  been  taken  by  the  plaintiff  on  a  special  contract  by  him 
not  to  sue  the  defendant,  and  as  that  was  proved  by  the  evidence,  the 
plea  was  made  out.  Whereupon  the  plaintiff's  counsel  elected  to  be 
nonsuited,  the  learned  judge  giving  him  leave  to  move  to  enter  a  verdict 
for  the  amount  of  the  bill,  if  the  court  should  be  of  opinion  that  the 
plaintiff  was  entitled  to  recover. 

G.  Henderson  now  moved  accordingly,  on  the  grounds  taken  at  the 
trial. 

Sed  Per  Curiam.  This  defense  was  clearly  admissible,  inasmuch  as 
it  showed  that  the  acceptance  was  in  truth  for  the  accommodation  of 
the  plaintiff,  and  that  all  the  parties.put  their  names  to  the  bill  without 
consideration.  With  regard  to  the  evidence  being  inconsistent  with 
the  terms  of  the  instrument,  we  are  of  opinion  that  the  agreement  as 
to  payment  was  collateral,  ajid  not  part  of  the  original  contract.  It 
was  a  collateral  agreement,  that  the  plaintiff  would  not  enforce  the  con- 
tract upon  the  bill. 

Rule  refused. 


138  NATURE   AND  LIABILITIES   OF  PARTIES 

GROCERS'  BANK  OF  CITY  OF  NEW  YORK  v.  PEN  FIELD 

et  al. 

(Court  of  Appeals  of  New  York,  1S77.     G9  N.  Y.  502,  25  Am.  Rep.  231.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  First  Judicial  Department,  reversing  a  judgment  in  favor  of 
defendants,  entered  upon  the  report  of  a  referee  (reported  below,  7 
Hun,  279). 

This  action  was  upon  two  promissory  notes,  on  which  defendants 
Penlield  and  Stone  were  makers,  which  were  made  payable  to  defend- 
ant' Truax,  and  by  him  indorsed  and  transferred  to  plaintiff. 

The  referee  found,  in  substance,  that  the  notes  were  executed  by 
the  makers  without  any  consideration,  were  accommodation  notes,  and 
were  received  by  plaintiff  solely  as  collateral  security  for  a  precedent 
debt,  without  any  agreement  to  extend  the  time  of  payment  of  the 
debt,  and  thereupon  held  that  plaintiff  was  not  a  bona  fide  holder,  and 
directed  judgment  dismissing  the  complaint  as  to  said  makers." 

Rapallo,  J.  We  think  that  the  order  in  this  case  must  be  affirmed 
on  the  ground  stated  by  Brady,  J.,  in  his  opinion  delivered  at  General 
Term.  Whatever  confusion  may  have  existed  upon  the  point,  we  think 
that  we  may  now  safely  say,  in  the  language  of  Professor  Parsons  (1 
Parsons  on  Notes  and  Bills,  296),  that  it  is  universally  conceded  that 
the  holder  of  an  accommodation  note,  without  restriction,  as  to  the 
mode  of  using  it,  may  transfer  it  either  in  payment  or  as  collateral 
security  for  an  antecedent  debt,  and  the  maker  will  have  no  ,def ense. 
See,  also.  Story  on  Bills,  §  192,  note  m,  and  Story  on  Notes,  §  195, 
and  authorities  cited.  The  existing  debt  is  a  sufficient  consideration  for 
the  transfer,  and  no  new  consideration  need  be  shown.  It  is  only  where 
the  note  has  been  diverted  from  the  purpose  for  which  it  was  intrusted 
to  the  payee,  or  some  other  equity  exists  in  favor  of  the  maker,  that 
it  is  necessary  that  the  holder  should  have  parted  with  value  on  the 
faith  of  the  note,  in  order  to  cut  off  such  equity  of  the  maker.  Cole 
v.  Saulpaugh,  48  Barb.  104 ;  Bank  of  Rutland  v.  Buck,  5  Wend.  66 ; 
Lathrop  V.  Morris,  5  Sandf .  7. 

It  has  been  held  by  high  authority  that  an  antecedent  debt  is  suffi- 
cient even  in  the  case  of  a  note  fraudulently  diverted  to  constitute  the 
holder  a  bona  fide  holder  for  value  without  any  extension  of  time  or 
surrender  of  securities  or  other  new  consideration.  Swift  v.  Tyson, 
16  Pet.  1,  10  L.  Ed.  865.  But  in  this  state  that  doctrine  does  not 
prevail.  Stalker  v.  McDonald,  6  Hill,  93,  40  Am.  Dec.  389.  The 
leading  authorities  upon  the  subject  are  reviewed  in  the  case  of  Mait- 
land  V.  Citizens'  Bank,  40  Md.  540,  17  Am.  Rep.  620.  Whatever 
difference  of  opinion  may  have  existed,  as  to  the  case  of  a  note  diverted 
or  fraudulently  put  in  circulation,  it  must  be  regarded  as  settled  that 

5  Arguments  of  counsel  omitted. 


ACCOMMODATION   PARTIES  ^-^^ 

an  indorsee  of_a  negotiable  note  made  fiirJ;he  accQjnmodation  of  the 
indpn^cr,  but  without  restriction  as  to  its  use,  taking  tin-  umi..-  in  ■;  .od 
^tlTas  collateral  security '?or  an  antecedent^debt,  and  without  other 
consideration,  is  entitled  to  the  po'silion  of  a  holder  for  value,  and 
not  affected  by  the  defense  of  want  of  consideration  to  the  maker. 

We  should  not  have  deemed  it  necessary  to  discuss  the  point  so 
much  at  length,  but  for  the  reason  that  it  does  not  appear  ever  to  have 
been  previously  expressly  adjudicated  in  this  court. 

The  order  should  be  affirmed,  and  judgment  absolute,  etc.  All  con- 
cur. 


MARLING  V.  JONES  et  al. 

(Supreme  Court  of  Wisconsin,  1909.     13S  Wis.  82,  119  N.  W.  931,  131  Am.  St 

Rep.  99G.) 

Appeal  from  a  judgment  dismissing  plaintiff's  complaint.  The  ac- 
tion was  against  Jones  as  maker  of  a  note,  which  he  had  made  for  the 
accommodation  of  Herman.  After  maturity  Herman  negotiated  the 
note  to  the  plaintiff,  who  paid  value  for  it." 

Timlin,   j.     *     *     *     Was   the   action   properly   dismissed   as   to 
Jones  ?    No  consideration  moving  to  the  accommodation  maker  is  nec- 
essary  to  uphold  an  accommodation  uuic    The  very  name  of  the  paper 
suggests  this.  'The  consideration  in  such  case  which  supports  the  prom- 
ise of  the  accommodation  maker  is  that  parted  with  by  the  person  tak- 
ing the  accommodation  note  and  received  by  the  person  accommodated. 
Nor  is  it  any  defense  by  the  maker  of  an  accommodation  note  that  the 
taker  other  than  the  person  accommodated,. whether  indorsee  or  trans- 
feree for  value,  knew  before  and  when  he  took  the  note  that  the  ac- 
commodation maker  received  no  consideration.    This  would  be  merely 
showing  that  such  taker,  indorsee,  or  transferee  knew  that  it  was  an 
accommodation  note.     If  this  were  sufficient  to  defeat  the  note,  there 
could  be  no  such  thing  as  accommodation  paper,  except  in  cases  of  ig- 
norance of  this  fact  on  the  part  of  the  taker,  indorsee,  or  transferee, 
and  this  would  be  contrary  to  common  experience,  and  avoid  many  of 
the  daily  transactions  in  banking  and  other  branches  of  business.    Sec- 
tion 1675—55,  vol.  3,  Sanborn's  St.  Supp.  1906.     But  the  accommoda- 
tion note  in  question  was  transferred  by  the  party  accommodated, 
namely,  the  payee  therein,  after  it  became  due. 

Does  this  circumstance  permit  the  accommodation  maker  to  avoid  the 
note  on  the  ground  that  he  received  no  consideration?  If  the  effect  of 
a  transfer,  after  due,  is  merely  to  leave  the  transferee  subject  to  notice 
or  knowledge  of  the  true  circumstances  attending  the  execution  of  the 
note  in  question,  and  for  this  reason  subject  him  to  defenses,  then,  as 

6  The  statement  of  facts  is  abridged  from  the  opinion.     Part  of  the  case 
relating  to  a  mortgage  given  to  secure  the  note  is  omitted. 


140  NATURE  AND  LIABILITIES   OF  PARTIES 

actual  knowledge  that  the  note  was  accommodation  paper  would  be  no 
defense  by  the  accommodation  maker  as  against  the  transferee  for 
value  from  the  party  accommodated,  it  would  seem  that  it  could  make 
no  difference  in  the  liability  of  the  accommodation  maker  upon  this 
ground  whether  the  note  was  transferred  before  or  after  due.  Aside 
from  this  imputed  notice  or  knowledge,  or  actual  notice  or  knowledge, 
it  is  not  true  that  the  taker  for  value  from  the  party  accommodated 
stands  in  the  shoes  of  the  latter.  The  difference  between  jthem  is  that 
one  has  parted  with  value  for  the  notc"~and~the  other  has  not.    Injiei- 


ther  case  has  the  maker  received  a  cojisideration  moving  to  him.  So_ 
that  bLet\ve;en"the  party  accommodated  and  the  accommodation  maker 
there  js  no  consideration  parted  with  or  received  by  either,  while  be- 
tween the  transferee  for  value  and  the  accommodation  maker  there 
is  a  consideration  moving  from  the  former  at  the  instance  of  the  latter 
.sufficient  to  support  the  contract.  There  is  considerable  conflict  among 
the  decisions  on  this  point,  and  those  text-writers  who  profess  to  have 
made  a  thorough  examination  of  the  cases  seem  to  incline  to  the  belief 
that  the  weight  of  authority  upholds  the  view  that  the  transfereenof  ac-~ 
commodation  paper  after  due  may  enforce  the  same  against  the  accom- 
modation maker.  Joyce,  Defenses  to  Com.  Paper,  §  282  (A.  D.  1907) ; 
1  Dan.  Neg.  Inst.  (5th  Ed.)  §  726  (A.  D.  1903) ;  2  Randolph,  Com. 
Paper  (2d  Ed.)  §  677  (A.  D.  1899) ;  Story,  Prom.  Notes  (7th  Ed.)  § 
194  (A.  D.  1878) ;  2  Parsons,  Notes  and  Bills,  p.  29  (A.  D.  1865) ; 
Mersick  v.  Alderman,  77  Conn.  634,  60  Atl.  109,  2  Ann.  Cas.  254; 
Black  v.  Tarbell,  89  Wis.  390,  61  N.  W.  1106;  1  Am.  &  Eng.  Ency. 
Law  (2d  Ed.)  364. 

The  Uniform  Negotiable  Instrument  Law  (Sanborn's  St.  Supp.  1906, 
§§  1675  to  1684 — 7)  enacted  by  the  Legislature  of  this  state,  and  in 
like  manner  adopted  by  34  states  of  the  Union,  and  by  Congress  for 
the  District  of  Columbia,  in  the  effort  to  bring  about  more  uniformity 
of  decision  regarding  these  instruments  of  commerce,  appears  to  dis- 
tinguish between  a  holder  for  value  and  a  holder  in  due  course.  Bran- 
nan,  Neg.  Inst.  Law  (A.  D.  1908);  Bunker,  Neg.  Inst.  Law  (A.  D. 
1905).  Section  1675—55,  Sanborn's  St.  Supp.  1906,  defines  who  is  an 
accommodation  party,  and  provides  that  such  party  is  liable  on  an 
instrument  to  a  holder  for  value,  notwithstanding  such  holder  at  the 
time  of  taking  the  instrument  knew  him  to  be  only  an  accommodation 
party.  Section  1675,  Sanborn's  St.  Supp.  1906,  defines  "holder"  to 
mean  the  payee  or  indorsee  of  a  bill  or  note  who  is  in  possession  of  it, 
or  the  bearer  thereof,  and  defines  "value"  to  mean  a  valuable  consid- 
eration. On  the  other  hand,  a  holder  in  due  course  is  defined  in  sec- 
tion 1676 — 22,  Sanborn's  St.  Supp.  1906,  to  be  one  who  has  taken  the 
instrument  under  the  following  conditions :  (1)  That  it  is  complete  and 
regular  upon  its  face ;  (2)  that  he  became  the  holder  before  it  was  over- 
due,  and  without  notice  that  it  had  been  previously  dishonored,  if  such 
was  the  fact ;  (3)  that  he  took  it  in  good  faith  and  for  value ;   (4)  that 


ACCOMMODATION   PARTIES 


141 


at  the  time  it  was  negotiated  to  him  he  had  no  notice  of  any  infirmity 
in  the  instrument  or  defect  in  the  title  of  the  person  negotiating  it ; 
(5)  that  he  took  it  in  the  usual  course  of  business. 

In  the  hands  of  a  holder  otherwise  than  in  due  course  such  note  is 
subject  to  the  same  defenses  as  if  the  notes  were  not  negotiable.     Sec- 
tion 1676—28,  Sanborn's  St.  Supp.  1906.     A  negotiable  instrument  is 
discharged  by  the  payment  in  due  course  by  the  party  accommodated. 
It  is  not  discharged  by  payment  by  a  party  secondarily  liable  thereon, 
but  remits  such  party  to  his  rights  against  him  primarily  liable  (section 
1679—2,  Sanborn's  St.  Supp.  1906),  except  where  it  is  made  for  ac- 
commodation and  paid  by  the  party  accommodated  (Id.).    On  the  other 
hand,  there  are  the  cases  of  Chester  v.  Dorr,  41  N.  Y.  279;    Peale  v. 
Addicks,  174  Pa.  543,  34  Atl.  201 ;   Bacon  v.  Harris,  15  R.  I.  599,  10 
Atl.  647;    Battle  v.  Weems,  44  Ala.  105;    and  Simons  v.  Morris,  53 
Mich.  155,  18  N.  W.  625.     See,  however,  in  Alabama  the  later  case 
of  Connerly  v.  Planters'  &  M.  Ins.  Co.,  66  Ala.  432;   in  Michigan  the 
later  case  of  Warder,  B.  &  G.  Co.  v.  Gibbs,  92  Mich.  29,  52  N.  W.  7Z. 
No  doubt  there  exists  a  class  of  defenses  in  favor  of  the  accommo- 
dation maker  of  negotiable  paper  which  may  not  be  urged  in  cases 
where  the  note  is  fair  on  its  face  and  negotiated  in  due  course  before 
due  to  a  purchaser  for  value,  without  notice  or  knowledge  of  any  in- 
firmity, but  which  might  be  urged  in  favor  of  the  accommodation  maker 
if  the  note  were  overdue  when  negotiated.     But  the  fact  that  the  ac- 
commodation maker  received  no  consideration  is  not  one  of  these  de- 
fenses, so  long  as  the  note  was  negotiated  by  his  express  or  implied 
authority.    The  fact  is  here  established  that  this  note  was  in  its  incep- 
tion accommodation  paper.    Jones  made  to  Herman  no  express  restric- 
tion upon  its  use  for  that  purpose.    We  do  not  overlook  the  testimony 
of  Brand  with  reference  to  conversations  between  him  and  Herman 
not  in  behalf  of  Jones,  which  the  court  below  from  its  findings  must 
have  rejected  as  incredible.    We  approve  this  rejection.    The  testimony 
is  overborne  by  the  circumstantial  evidence.     It  is  a  question  upon 
which  the  precedents  are  at  some  variance  whether  or  not  the  agency 
of  the  party  accommodated  to  use  the  accommodation  paper  to  raise 
money  thereon  (no  express  agreement  appearing)  expires  with  the  ma- 
turity of  the  paper.    The  greater  number  of  courts  seem  to  favor  the 
view  that  the  agency  to  negotiate  an  accommodation  paper  and  raise 
money  thereon  is  not  so  limited.    See  citations  supra. 

The  courts  of  this  state  are  not  yet  committed  upon  the  question 
presented,  and  it  seems  more  in  harmony  with  the  uniform  negotiable 
instrument  law,  and  with  the  weight  of  judicial  authority,  to  hold,  as 
we  do,  that  the  mere  fact  that  the  accommodation  note  was  transferred 
by  the  party^  accommodated  after  due  to  a  holder  for  value  does  not 
permit  the  accomnv^  Intion  maker  to  defeat  recovery  at  the  suit  of  the 
holder  for  value  merely  upon  the  ground  that  the  note  was  an  accom- 
modation note,  and  without  consideration  moving  to  the  accommoda- 


142  NATURE    AND   LIABILITIES    OF   PARTIES 

tion  maker.  This  necessitates  a  modification  of  the  judgment  of  the 
court  l)elow  so  as  to  permit  the  appellant  to  take  judgment  against  the 
accommodation  maker.  Jones.     *     *     * 


HARGER  et  al.  v.  WORRALU. 
(Court  of  Appeals  of  New  York,  1877.     G9  N.  Y.  370,  25  Am.  Rep.  206.) 

Rapallo,  J.  This  action  was  brought  against  the  appellant  and 
his  copartner  as  acceptors  of  a  bill  of  exchange  drawn  upon  them  by 
the  Pittston  &  Elmira  Coal  Company,  and  transferred  to  the  plaintiffs. 
The  complaint  contains  all  the  necessary  allegations  to  maintain  the 
action,  and  among  them  an  averment  that  after  acceptance  and  be- 
fore maturity,  the  bill  was,  for  value  received,  sold,  transferred  and 
delivered  to  the  plaintiffs.  The  answer  does  not  deny  any  of  the  alle- 
gations of  the  complaint,  but  sets  up  as  a  defense  that  the  bill  was  ac- 
cepted by  the  defendants  without  consideration  and  solely  for  the  ac- 
commodation of  the  coal  company,  and  to  enable  them  to  raise  money 
thereon,  and  that  it  was  discounted  by  the  plaintiffs  for  that  company 
at  a  usurious  rate  of  interest.  No  evidence  was  given  by  the  defend- 
ants in  support  of  this  defense,  except  that  the  acceptance  was  without 
consideration  as  between  the  drawers  and  acceptors  and  solely  for  the 
accommodation  of  the  drawers,  and  the  referee  so  found.  No  proof 
was  given  by  either  party  as  to  the  amount  paid  by  the  plaintiff's  for 
the  bill,  and  the  defendants  claimed  upon  the  trial  and  now  insist  that 
they  having  proved  themselves  to  be  mere  accommodation  acceptors,  it 
was  incumbent  upon  the  plaintiffs  to  show  what  value  they  paid  for 
the  bill,  and  that  their  recovery  should  be  restricted  to  the  amount  so 
paid. 

Such  would  undoubtedly  be  the  case  had  the  acceptance  been  ob- 
tained by  fraud  or  duress,  or  had  it  been  fraudulently  diverted  from 
the  purpose  for  which  it  was  given.  First  Nat.  Bank  v.  Green,  43 
N.  Y.  298.  But,  in  the  absence  of  proof  of  fraud  or  misappropriation, 
the  presumption  is  that  the  indorsee  of  a  negotiable  bill  or  note  is  a 
bona  fide  holder  for  value,  and  this  presumption  is  not  repelled  merely 
by  proof  that  the  bill  or  note  as  between  the  immediate  parties  was 
without  consideration,  and  was  made,  indorsed,  or  accepted  by  one 
for  the  sole  accommodation  of  the  other.  When  no  other  proof  is 
given  the  holder  is  not  bound  to  prove  a  valuable  consideration.  Ross 
V.  Bedell,  5  Duer,  462 ;  Mechanics'  &  Traders'  Bank  v.  Crow,  60  N. 
Y.  85.  The  proof  and  finding  that  the  bill  in  the  present  case  was  ac- 
cepted without  consideration,  and  solely  for  the  accommodation  of 
the  drawer,  constituted  no  defense  to  the  action,,  and,  as  no  other  fact 
was  proved  on  the  part  of  the  defense,  the  plaintiffs  were  clearly  en- 
titled to  judgment.    Grant  v.  EHicott,  7  Wend.  229. 

In  the  case  of  Bank  of  St.  Albans  v.  Gilliland,  23  Wend.  311,  35 


ACCOMMODATION    PARTIES  143 

Am.  Dec.  566,  cited  by  appellant,  the  note  was  given  for  the  accommo- 
dation of  a  firm,  and  applied  by  one  member  of  the  firm  to  his  indi- 
vidual use.  This  was  a  clear  misappropriation  of  the  note,  which 
threw  upon  the  holder  the  burden  of  proving  that  it  paid  value.  No 
such  diversion  appears  in  the  present  case.  The  other  references  by 
counsel  are  to  cases  where  one  member  of  a  firm  has  issued  accommo- 
dation paper  without  the  consent  of  his  copartners.  They  are  inap- 
plicable here,  as  the  acceptance  by  the  firm  is  admitted  in  the  pleadings. 
The  judgment  must  be  affirmed. 


14i  TBANSFEB 


TRANSFER 
I.  Delivery  without  Indorsement  of  Instrument  Payable  to  Order  * 


LANCASTER  NAT.  BANK  v.  TAYLOR. 

{Supreme  Judicial  Court  of  Massachusetts,  Worcester,  1S68.     100  Mass.  18, 

1  Am.  Rep.  71,  97  Am.  Dec.  70.) 

Contract  on  a  promissory  note  for  $1,000,  signed  by  the  defendant, 
dated  April  16,  1866,  payable  to  Jonathan  S.  Butterick  or  .order,  and 
indorsed  by  him  to  the  plaintiffs.  Trial  in  the  superior  court,  before 
Reed,  J.,  who  allowed  the  following  bill  of  exceptions : 

"It  was  conceded  at  the  trial  that  the  defendant  wrote  his  name  upon 
the  paper  produced  in  support  of  the  declaration,  and  that  the  plaintiffs 
received  the  same  on  April  16,  1866,  in  payment  of  a  previous  note  of 
hke  tenor  signed  by  the  defendant  and  indorsed  by  Butterick,  which 
fell  due  on  that  day ;  and  there  was  evidence  that  by  mistake  Butterick 
did  not  at  the  time  indorse  the  note  declared  on. 

"The  defendant  offered  to  show  that  Butterick  applied  to  him  to  sign 
a  note  for  $100  as  an  accommodation  for  Socrates  Henry,  and  that  for 
that  purpose  he  signed  a  blank  note,  which  Butterick  was  authorized  to 
fill  up  as  a  note  for  $100  only,  but  which  he  in  fact  by  fraud  and  with- 
out authority  filled  up  as  a  note  for  $1,000,  and  indorsed  and  got  dis- 
counted at  the  plaintiffs'  bank  for  his  own  benefit,  and  which  was  the 
previous  note  above  named. 

"The  defendant  further  offered  to  show  that  the  signature  to  the 
note  in  suit  was  obtained  by  Butterick  by  a  like  request  for  his  signa- 
ture to  a  note  for  $100  for  Henry's  benefit,  and  that  he  signed  his  name 
in  blank,  and  authorized  Butterick  to  fill  up  the  instrument  over  his 
signature  as  a  note  for  $100  only,  but  that  Butterick  fraudulently  and 
without  authority  filled  it  up  as  a  note  for  $1,000;  that  the  defendant 
never  received  anything  on  account  of  this  or  the  previous  note;  that 
Butterick  never  indorsed  the  note  to  the  plaintiffs  till  long  after  its 
maturity,  and  after  they  had  notice  of  the  above  facts ;  and  that  at  the 
time  of  the  taking  up  of  the  first  note  Butterick  was  responsible  and 
able  to  pay  the  same,  and  the  same  could  have  been  collected  of  him. 

"The  judge  ruled  that,  if  the  note  was  passed  and  sold  to  the  plain- 
tiffs before  maturity,  but  by  mistake  was  not  indorsed,  and  the  bank 
in  consideration  therefor  relinquished  a  note  for  a  like  amount  on 
which  the  defendant  was  legally  liable  as  maker,  and  the  note  was 
afterwards,  before  action,  indorsed  by  Butterick,  the  plaintiffs  would  be 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
90,  90a. 


MERE    DELIVERY    OF   INSTRUMENT   PAYABLE   TO    ORDER  145 

■entitled  to  recover,  even  if  the  facts  offered  by  the  defendant  were 
true;  whereupon  the  defendant  submitted  to  a  verdict,  and  excepted 
to  the  foregoing  ruhng."  - 

Foster,  J.  The  rule  that  the  indorsee  of  a  negotiable  promissory 
note,  who  has  taken  it  before  maturity  for  value  and  without  notice  of 
any  want  of  consideraiioii  nv  other  defect  renderinoQt  void_in  its  iiV;^ 
ception,  r.ui  enforce  it  against  the  maker,  notwithstanding  it  was  value- 
igss  in  the  liands"of  the  original  payee,  is  founded  upon  thej:ustom  of 
merchants  and  the  statute  of  3  &  4  Anne,  c,  9.  It  is  an  exception  to 
the  general  rule  of  the  common  law,  according  to  which  a  written 
promise  can  be  enforced  only  in  the  name  of  the  party  to  whom  it  is 
made,  and,  if  it  has  been  assigned,  although  the  assignee  is  allowed  to 
bring  an  action  upon  it  in  the  name  of  his  assignor,  yet  he  has  no 
greater  rights  than  the  assignor  possessed,  and  the  instrument  remains 
subject  to  every  defense  that  would  have  existed  if  no  assignment  had 
taken  place.  The  ordinary  rule  applies  to  all  notes  which  are  not  nego- 
tiable, and  to  all  negotiable  notes  which  are  not  duly  indorsed  for 
value  before  maturity.  A  note  not  negotiable  may  be  as.-^igned  and 
transferred  like  any  other  cliosc  in  action,  but  can  be  sued  only  in  the 
riame^of  tTie  payee,  and  is  liable  to  every  defense  existing  against  him. 
'A  negotiable  note  not  transferred  untd  it  is  overdue  may  be  sued  in 
the  name  of  the  indorsee,  but  as  to  defenses  must  be  treated  precisely 
like  one  not  negotiable.  And  a  'negotIable_note  which  is  transferred 
before  maturity,  but  not  indorsed  until  afterwards,  in  our  opinion  can 
stand  on  no  better  footing.  Whoever  receives  it  takes  a  contract  which 
upon  its  face  shows  that  it  is  subject  to  every  defense  that  could  have 
been  made  between  the  original  parties.  There  is  no  custom  of  mer- 
chants in  favor  of  such  an  assignee,  and  no  rule  of  law  by  which  he 
is  entitled  to  greater  rights  than  the  payee.  If  the  contract  was  orig- 
inally  invalid  for  want  of  consideration  or  other  cause,  so  will  it  be  in 
anynotlTeY  hands  into  whfch  it  passes  before  the  legal  title  is  transferred 
by  regular  indorsement.  No  such  indorsement  having  been  made  be- 
fore the  note  is  overdue  and  dishonored,  any  subsequent  one  takes 
effect  only  from  its  date.  There  is  no  doctrine,  known  to  the  mercan- 
tile law,  by  which  it  can  relate  back  to  the  time  of  the  equitable  trans- 
fer, and  place  the  assignee  in  the  same  position  as  if  he  had  been  be- 
fore maturity  the  holder  of  the  note  for  value. 

It  is  true  a  distinction  between  negotiable  and  nonnegotiable  notes 
has  been  recognized  in  regard  to  the  set-oft'  allowed  by  statute,  and, 
where  a  negotiable  note  was  transferred  for  value  before  it  was  dis- 
honored,  but  not  indorsed  till  afterwards,  a  previously  existing  set-olf 
of  a  distinct  demand  against  the  payee  was  not  allowed  to  prevail. 
Ranger  v.  Gary,  1  Mete.  369.  The  set-off  of  distinct  demands  is  a 
matter  regulated  by  statute,  and  not  a  common-law  defense.    And  the 

2  Arguments  of  counsel  are  omitted- 
Moore  Cases  B.&  N.— 10 


146  TRANSFER 

court  carefully  limit  the  application  of  their  opinion,  saying  that  "here 
is  no  question  of  want  or  failure  of  consideration  of  this  note,  no  offer 
to  prove  payment  of  it ;  but  the  defendants  rely  on  an  account  filed  in 
offset."  This  case  is  therefore  no  authority  against  the  conclusion  to 
which  we  are  conducted  by  applying  the  elementary  principles  of  the 
law  merchant. 

The  facts  in  the  present  action  show  that  the  defendant  intrusted  to 
Sutterick  his  signature  to  a  blank  note,  with  authority  to  write  over  it 
a  note  of  $100  for  the  benefit  of  one  Henry;  that  Butterick  fraudu- 
lently filled  up  the  note  now  in  suit  so  as  to  make  it  one  for  the  sum 
of  $1,000  payable  to  his  own  order,  and  passed  it  to  the  Lancaster 
Bank  in  payment  of  a  former  note — that  is,  for  a  valuable  considera- 
tion. But  Butterick  did  not  then  indorse  the  note ;  and  it  remained 
in  the  hands  of  the  bank  unindorsed  till  after  its  maturity.  At  a  later 
date,  when  the  note  was  overdue  and  the  bank  had  notice  of  all  these 
facts,  Butterick  did  indorse  it.  Undeniably,  if  he  had  done  so  orig- 
inally, the  defendant  would  have  been  liable.  Having  placed  it  in  the 
power  of  Butterick  to  perpetrate  such  a  fraud,  the  injury  caused  by 
the  diefendant's  own  negligence  must  have  been  borne  by  himself,  and 
ngt  by  the  bank,  which  was  in  no  fault  and  guilty  of  no  want  of  due 
care.  But  the  defendant  is  liable  only  upon  and  to  the  extent  of  the 
contract  which  was  written,  and  not  for  one  which  might  have  been, 
but  was  not,., made.  The  bank  saw  fit  to  take  the  note,  which  pur- 
ported to  be  in  favor  of  Butterick,  without  requiring  him  to  indorse  it. 
They  therefore  took  it  subject  to  any  defense  which  might  be  made  to 
an  action  in  Butterick's  name.  And  the  subsequent  indorsement  does 
not  improve  their  position.  When  the  note  came  into  the  hands  of  the 
bank,  payable  to  the  order  of  Butterick  and  not  indorsed  by  him,  the 
very  form  of  the  instrument  gave  notice  that  no  one  could  bring  an 
action  upon  it  except  in  the  name  of  Butterick,  and  that  it  was  subject 
to  every  defense  affecting  its  original  validity  which  could  have  been 
made  to  it  while  it  continued  'in  his  hands. 

There  is  a  recent  English  case  in  which  this  identical  question  has 
been  determined  by  eminent  judges,  of  great  experience  and  authority 
in  mercantile  law.  A  check  or  sight  draft,  obtained  by  fraud  from 
the  defendant  by  one  Griffiths,  was  transferred  for  a  valuable  consid- 
eration to  the  plaintiff,  before  dishonor  and  with  no  notice  to  him  of 
the  fraud.  But  the  actual  indorsement  of  the  paper  was  not  made  till 
the  instrument  was  dishonored  and  the  plaintiff  had  notice  of  its  fraud- 
ulent origin.  On  this  state  of  facts,  Erie,  C.  J.,  said :  "The  intention, 
no  doubt,  was,  that  the  plaintiff  should  take  the  instrument  as  indorsee ; 
but  the  indorsement  was  omitted,  and  whilst  it  was  in  the  hands  of  the 
plaintiff  without  being  indorsed  it  was  as  if  it  had  been  an  ordinary 
chattel  that  had  passed  by  an  equitable  and  not  by  a  legal  assignment. 
All  the  rights,  therefore,  that  the  plaintiff  had  at  that  time  at  law  were 
such  as  Griffiths  had,  and  no  more.  Then  Griffiths,  having  defrauded 
the  defendant  of  the  bill,  could  have  no  right  to  it  as  against  the  de- 


MERE    DELIVERY    OF   INSTRUMENT   PAYABLE   TO    ORDER  147 

fendant.  The  law  relating  to  negotiable  instruments  is  that  the  fact 
of  delivery  gives  to  the  person  who  takes  the  instrument  a  title  which  fs 
good  as  against  all  the  world,  notwithstanding  there  ma\  '  me  defect 
"m  the  title  of  fiTrnTroni  \vhom  the  bill  is  taken,  provided  it  istaken  by 
Jndofscnienr  f or  value  and  without  notice  of  the  fraud  which  consti- 
tutes the  dcfect'in  title.  Now  the  title  which  the  plaintiff  gained  on  the 
delivery  of  this  instrument  was  not  like  that  which  he  would  have  ob- 
tained on  the  delivery  of  a  negotiable  instrument  not  requiring  indorse- 
ment; it  was  yet  incomplete,  but  capable  of  being  perfected  by  indorse- 
ment. 5cforFlieTiad"  obtaified  the  indorsement  he  was  not  within 
tlie  rule  of  law  I  have  mentioned;  and  when  he  did  obtain  it  he  had 
notice  that  he  could  not  gain  any  title  to  the  bill  on  account  of  the 
fraud  practiced  on  the  drawer."  In  the  same  case,  Willes,  J.,  said : 
"The  general  rule  of  law  is,  'Nemo  dat,  qui  non  habet;'  but  in  the  case 
of  negotiable  instruments,  in  order  that  they  may  circulate  freely,  and 
that  persons  may  not  on  every  occasion  be  put  to  the  trouble  of  in- 
quiring into  their  origin  and  the  transactions  between  the  original  par- 
ties to  the  bill,  there  is  an  exception  to  the  above  rule,  and  a  person 
taking  a  bill  during  its  currency,  for  value,  and  without  notice  of  any 
fraud  perpetrated  by  him  from  whom  he  takes  it,  is  entitled  to  sue  any 
person  whose  name  is  on  the  bill,  notwithstanding  that  the  person 
against  whom  he  brings  his  action  was  originally  defrauded  of  that 
bill.  It  is  necessary,  however,  that  the  bill  should  have  been  in- 
dorsed to  the  holder  and  taken  by  him  during  its  currency,  and  not 
after  it  became  due;  for  a  person  who  takes  a  bill  in  any  manner  after 
it  has  become  due  takes  it  subject  to  all  the  equities  between  the  ante- 
cedent parties.  The  person  who  claims  the  benefit  of  this  law  relating 
to"bins  of  exchange  must  prove  that  he  is  entitled  to  do  so;  he  must 
show  that  he  took  the  bill  by  indorsement  for  value  and  without  notice 
of  fraud.  This  is  a  doctrine  of  the  law  merchant  in  favor  of  those  who 
have  acquired  by  their  diligence  a  complete  title.  The  plaintiff  has 
failed  to  show  that  he  has  done  so,  and  cannot  now  recover  upon  it." 
\Miistler  V.  Forster,  14  C.  B.  (N.  S.)  248. 

In  the  opinion  of  a  majority  of  the  court,  these  citations  express  with 
fullness  and  accuracy  the  rule,  and  the  limitations  of  the  rule,  of  the 
law  merchant,  which  gives  to  the  bona  fide  indorsee  for  value  before 
maturity  of  a  negotiable  instrument  a  better  title  and  a  more  complete 
right  of  action  than  the  original  payee  of  the  instrument  may  have  pos- 
sessed. The  learned  judge  at  the  trial  having  proceeded  upon  a  ditler- 
ent  view  of  the  law,  the  exceptions  are  sustained. 


148  TBANSFEB 


II.  Right  to  Sue  « 


IMAURAN  V.  LAMB. 
(Supreme  Court  of  New  York,  1827.    7  Cow.  174.) 

Assumpsit  by  the  plaintiff  as  bearer,  against  the  defendant,  as  draw- 
er, of  a  check  on  the  Bank  of  America,  dated  New  York,  October  21, 
1824,  for  $1,912.02,  payable  to  No.  25  or  bearer. 

The  cause  was  tried  at  the  New  York  circuit,  March  25,  1826,  before 
Duer,  Judge. 

It  was  admitted  at  the  trial  that  the  plaintiff  had  no  interest  in  the 
check,  but  sued  for  the  benefit  of  Mrs.  Remsen,  to  whom  the  check 
belonged,  with  her  consent. 

The  defendant  objected  that  the  action  was  not  sustainable  by  the 
plaintiff  in  his  name;  but  the  objection  was  overruled.  Verdict  for 
the  plaintiff.* 

WoODWORTH,  J.  It  is  contended  that  the  plaintiff,  being  a  mere 
agent,  and  having  no  interest,  cannot  maintain  this  action.  It  appears 
that  the  plaintiff  came  fairly  by  the  possession ;  and  his  name  was  used 
for  the  benefit  of  Mrs.  Remsen,  claiming  to  be  the  person  in  interest. 
The  rule  is  that  the  bearer  of  a  note  or  bill  payable  to  bearer  need  not 
prove  a  consideration,  unless  he  possesses  it  under  suspicious  circum- 
stances. 1  Chit,  on  Bills,  51.  If  a  question  of  mala  fide  possessio 
arises,  that  is  a  fact  to  be  raised  by  the  defendant,  and  submitted  to  the 
jury.  Conroy  v.  Warren,  3  John.  Cas.  259,  2  Am.  Dec.  156.  In  that 
case,  Mr.  Justice  Kent  referred  to  Livingston  v.  Clinton,  decided  July 
term,  1799,  where  the  law  was  laid  down  that,  if  a  note  be  indorsed  in 
blank,  the  court  never  inquires  into  the  right  of  the  plaintiff,  whether 
he  sues  in  his  own  right  or  as  trustee ;  that  any  person  in  the  possession 
of  a  note  may  sue;  and  he  says  a  decision  to  the  like  eff'ect  (Cooper 
V.  Kerr)  was,  in  March,  1800,  affirmed  in  the  Court  of  Errors.  In 
Payne  v.  Eden,  3  Caines,  213,  the  note  was  indorsed  to  the  plaintiff. 
He  had  no  interest,  but  was  merely  a  trustee  for  others.  No  objection 
was  taken  to  his  want  of  interest.  The  question  was  as  to  the  consid- 
eration of  the  note,  and,  that  being  illegal,  the  plaintiff  failed.  Thomp- 
son, Justice,  who  delivered  the  opinion  of  the  court,  considered  the 
cause  in  the  same  point  of  view  as  if  the  original  parties  were  before 
the  court.  In  consequence  of  proving  that  the  plaintiff  has  no  interest, 
the  remedy  is  not  defeated;  but  the  defendant  is  permitted  to  avail 
himself  of  a  defense  against  the  original  party.  It  is  no  answer  to  say 
that  the  defendant  cannot  plead  a  set-off  against  the  cestui  que  trust. 

3  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §  92a. 

4  The  statement  of  facts  is  abridged,  and  the  arguments  of  counsel  and  part 
of  the  opinion  are  omitted. 


RIGHT  TO  SUB  149 

It  may,  in  some  cases,  be  a  hardship,  as  such  a  defense  appHes  to  llie 
parties  on  the  record  only.    The  act  authorizing  a  sct-ofif  may  not  be 
sufficient  to  meet  this  case ;  but  the  remedy  is  with  the  Legislature,  not 
the  courts  of  justice.     *     ♦     * 
New  trial  denied. 


HAYS  V.  HATHORN  et  al. 
(Court  of  Appeals  of  New  York,  1878.    74  N.  T.  48G.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court, 
in  the  Third  Judicial  Department,  affirming  a  judgment  in  favor  of 
plaintiff,  entered  upon  a  decision  of  the  court  on  trial  without  a  jury 
(reported  below,  10  Hun,  511). 

This  action  was  upon  a  promissory  note,  alleged  in  the  complaint 
to  have  been  made  by  the  firm  of  Hathorn  &  Southgate,  payable  to 
the  order  of  defendant,  Frank  H.  Hathorn,  and  by  him  indorsed  and 
transferred  to  plaintiff. 

The  facts  appear  sufficiently  in  the  opinion. "^ 

Hand,  J.  In  their  answer  the  defendants  denied  that  the  note  on 
which  the  action  was  brought  was  ever  transferred  to  the  plaintifif  or 
that  he  was  the  legal  owner  or  holder  thereof.  They  further  denied 
that  the  plaintiff  was  the  real  party  in  interest,  and  alleged  that  the 
Saratoga  County  Bank  was  the  real  party  in  interest  and  the  owner 
and  holder  and  should  be  the  plaintiff,  and  that  the  note  was  duly  trans- 
ferred to  it  instead  of  to  the  plaintiff. 

Upon  the  trial,  the  plaintiff'  having  produced  the  note  which  was 
payable  to  the  order  of  F.  H.  Hathorn  and  indorsed  in  blank  by  him, 
rested.  The  defendants  then  offered  to  prove  that  the  note  "was  not 
the  property  of  the  plaintiff;  that  the  same  was  never  transferred  to 
him;  that  he  was  not  the  real  party  in  interest;  that  the  note  was  the 
property  of  the  savings  bank,  who  is  the  real  party  in  interest."  The 
evidence  was  objected  to  by  the  plaintiff  as  immaterial  and  was  ex- 
cluded. This  ruling  I  think  was  erroneous  and  renders  necessary  a  re- 
versal of  the  judgment. 

Under  the  answer  and  this  offer,  the  defendants  unquestionably  pro- 
posed to  show  substantially  that  the  plaintiff  had  no  title,  legal  or 
equitable,  to  the  note,  and  no  right  as  owner  to  its  possession.  This 
might  have  been  done  by  proving  that  he  was  the  mere  finder  or  the 
unlawful  possessor,  or  that  the  right  to  its  possession  and  ownership 
was  in  the  bank,  to  whom  they  were  liable  thereon,  or  in  some  other 
way.    This  they  had  a  right  to  show. 

It  may  be  that,  had  their  offer  been  admitted,  they  would  have  pro- 
duced in  fact  no  evidence  to  sustain  it  or  prevent  a  recovery,  but  in 
considering  the  validity  of  their  exception  to  the  exclusion,  we  must 

»  The  arguments  of  counsel  are  omitted. 


150  TRANSFER 

assume  that  the  evidence  would  have  fully  covered  the  propositions 
contained  in  the  offer.  And,  as  remarked  in  the  dissenting  opinion  in 
the  court  below,  "unless  the  defendants  are  to  be  precluded  altogether 
from  giving  any  evidence  of  a  matter  confessedly  issuable,  I  do  not  see 
how  this  offer  could  be  rejected." 

The  cases  relied  upon  as  justifying  the  exclusion  of  the  evidence  do 
not  go  that  length.  In  Cummings  v.  JMorris,  25  N.  Y.  625,  it  was  held 
that  the  maker  of  a  note  could  not  defeat  the  plaintiff,  not  a  payee,  by 
proof  that  the  consideration  of  the  transfer  to  him  was  contingent  upon 
his  collecting  the  note.  Such  plaintiff  was  declared  to  be  the  real  party 
in  interest  on  the  express  ground  that  the  transfer  was  complete  and 
irrevocably  vested  in  him  the  title  to  the  note.  In  City  Bank  v.  Perkins, 
29  N.  Y.  554,  86  Am.  Dec.  332,  there  was  no  question  of  exclusion 
of  evidence,  but  all  the  circumstances  being  proved,  it  was  held  that 
where  the  cashier  of  a  bank  holding  commercial  paper,  pledged  it  "duly 
indorsed"  to  the  plaintiff  as  security  for  a  loan  by  the  plaintiff  to 
his  bank,  and  it  had  been  actually  transmitted  under  his  direction  to 
tne  plaintiff  so  indorsed,  it  was  no  defense  to  one  admitting  his  liabili- 
ty upon  such  paper  to  show  lack  of  authority  in  the  cashier  alone  to 
contract  a  loan  for  the  bank ;  or  the  fraudulent  diversion  by  him  of  the 
funds  received  from  the  plaintiff  on  such  loan.  Some  remarks  in  the 
opinion  in  that  case,  not  necessary  to  the  decision,  are  perhaps  too 
broad  to  be  entirely  approved,  but  it  is  fully  conceded  in  it  that  proof 
that  the  plaintiff  had  no  right  whatever  to  the  possession  but  was  a 
mere  finder  or  had  obtained  it  by  some  "positive  breach  of  law"  would 
be  a  defense. 

Brown  v.  Penfield,  36  N.  Y.  473,  holds  merely  that  proof,  by  the 
party  liable  on  a  bill,  of  gross  inadequacy  of  the  consideration  for  the 
transfer  of  such  bill  to  the  plaintiff  does  not  impeach  the  validity  of 
such  transfer  as  to  the  party  so  liable. 

In  Allen  v.  Brown,  44  N.  Y.  228,  it  was  decided  that,  as  against  the 
plaintiff  holding  legal  title  to  the  claim  by  written  assignment  valid  up- 
on its  face,  the  debtor  cannot  raise  the  question  as  to  the  consideration 
for  such  assignment  or  the  equities  between  the  assignor  and  assignee. 

In  Eaton  v.  Alger,  47  N.  Y.  345,  the  note  being  payable  to  bearer 
and  produced  by  the  plaintiff  upon  the  trial,  it  was  proved  that  the 
payee  had  delivered  it  to  the  plaintiff  upon  his  undertaking  to  collect  it 
at  his  own  expense  and  pay  to  such  payee  upon  its  collection  a  certain 
sum  of  money.  This  was  held  to  show  sufficiently  that  the  plaintiff 
and  not  the  payee  was  the  real  party  in  interest  under  the  Code. 

Sheridan  v.  Mayor,  68  N.  Y.  30,  reiterates  the  doctrine  that,  as 
against  the  debtor,  the  plaintiff  holding  a  written  assignment  of  the 
claim  to  himself  valid  on  its  face,  obtained  the  legal  title  and  was  the 
real  party  in  interest  notwithstanding  the  fact  that  the  assignment  was 
without  consideration  and  merely  colorable  as  between  him  and  the 
original  claimant.  Such  assignment  is  expressly  declared  to  protect  the 
debtor  paying  the  assignee  against  a  subsequent  suit  by  the  assignor. 


RIGHT  TO   SUE  l."jl 

In  Gage  v.  Kendall,  15  Wend.  640,  the  fact  that  the  prosecution  of 
the  note  was  by  its  owner  and  holder  in  the  name  of  the  plaintiff,  a 
stranger  to  it,  without  his  consent  or  knowledge,  was  sought  to  be  set 
up  as  a  defense,  but  it  was  ruled  out  on  the  ground  that  the  nominal 
plaintiff  need  have  no  title  to  or  interest  in  the  paper  sued  upon.  We 
apprehend  the  Code  has  changed  this,  and  that  such  facts  would  now 
be  fatal  to  an  action.  Such  a  plaintiff  could  not  in  any  view  be  the  real 
party  in  interest.  Indeed  he  would  not  even  have  manual  possession  of 
the  paper. 

From  this  glance  at  the  cases,  it  appears  that  it  is  ordinarily  no  de- 
fense to  the  party  sued  upon  commercial  paper,  to  show  that  the  trans- 
fer under  which  the  plaintiff  holds  it  is  without  consideration  or  subject 
to  equities  between  him  and  his  assignor,  or  colorable  and  merely  for 
the  purpose  of  collection,  or  to  secure  a  debt  contracted  by  an  agent 
without  sufficient_authority.  It  is  sufficient  to  make  the  plaintiff  the 
real  party  in  interest  if  he  have  the  legal  title  either  by  written  trans- 
fer or  delivery,  whatever  may  be  the  equities  between  him  and  his  as- 
signor. But,  to  be  entitled  to  sue,  he  must  now  have  the  right  of  pos- 
session and  ordinarily  be  the  legal  owner.  Such  ownership  may  be  as 
equita])lc  trustee,  it  may  have  been  acquired  without  adequate  consid- 
eration, but  must  be  sufficient  to  protect  the  defendant  upon  a  re- 
covery a^ainstjnm  from  a  sjjibsequent  action  by  the  assignor. 

As  we  understand  the  scope  of  the  oft'er  in  the  present  case,  it  went 
to  entirely  disprove  any  ownership  or  interest  whatever,  oreven  right 
to  possession  as  owner  in  the  plaintiff.  It  should  therefore  have  been 
admitted.  It  may  be  true  that  the  plaintiff,  if  this  note  had  been  deliv- 
ered to  him  with  the  intent  to  transfer  title,  might  have  lawfully  over- 
written the  blank  indorsement  with  a  transfer  to  himself;  it  is  also 
true  that  the  production  of  the  paper  by  him  was  prima  facie  evidence 
that  it  had  been  delivered  to  him  by  the  payee  and  that  he  had  title  to 
it,  but  the  defendants'  oft'er  was  precisely  to  rebut  this  very  presump- 
tion, and  for  aught  that  we  can  know  the  evidence  under  it  would  have 
done  so. 

The  judgment  must  be  reversed  and  a  new  trial  ordered,  costs  to 
abide  the  event. 


152  DEFENSES 


DEFENSES 
I.  Real  Defenses* 


CLARK  V.  PEASE  et  al. 

(Supreme  Judicial  Court  of  New  Hampsliire,  1S60.  41  N.  H.  414.) 
This  is  an  action  of  assumpsit,  counting  upon  the  promissory  note 
of  the  three  deTendants,  dated  July  26,  1858,  for  $112.50,  payable  to 
one  Theodore  P.  Clark,  or  order,  on  the  1st  day  of  the  following 
November,  and  by  the  payee  indorsed  and  delivered,  on  the  day  of  its 
date,  to  the  plaintiff.  There  was  also  a  count  for  money  had  and  re- 
ceived, to  the  amount  of  $300.    Plea,  the  general  issue. 

The  defendants  offered  to  prove  that,  on  the  day  before  the  giving 
of  the  note,  all  of  the  makers  except  Charles  Pease  were  arrested  at 
Ellsworth,  in  Grafton  county,  by  Calvin  Clark,  a  deputy  sheriff,  by 
the  procurement  and  with  the  aid  of  the  payee,  and  held  by  them  in 
custody  until  the  next  day,  when  they  were  carried  by  them  to  Ply- 
mouth, and  there  held  in  custody  until,  to  effect  their  liberation,  this 
note  was  given,  the  said  Charles  Pease  signing  as  the  surety  of  the^ 
others;  that  the  arrest  was  made  without'any  warrant  or  other  lawful 
authority,  but  it  was  represented  by  the  sheriff  that  they  were  ar- 
rested for  the  criminal  oft'ense  of  malicious  mischief,  and  that  he  had 
the  right  to  arrest  them  without  a  warrant ;  that  this  note,  with  two  oth- 
ers, amounting  in  all  to  $250,  was  given  to  said  Theodore  P.  Clark  to 
obtain  the  release  from  duress  of  the  three  principals  in  the  note,  and 
upon  the  promise  by  the  payee  that  they  should  then  be  set  at  liberty, 
and  he  would  prosecute  them  no  further ;,  and  upon  the  execution  of 
the  note  they  were  set  at  liberty  accordingly. 

The  plaintiff  excepted  to  this  evidence,  as  no  defense  against  the 
indorsee,  without  proof  that  he  was  not  the  bona  fide  holder  of  the  note. 
But  the  court  ruled  that,  if  the  note  was  obtained  by  duress,  it  was 
void  in  the  hands  of  an  innocent  indorsee,  and  thereupon  the  plaintiff, 
admitting  for  the  purposes  of  this"  trial  that  the  defendants'  witnesses 
would  testify  to  the  facts  stated,  a  verdict  for  the  defendants  was  taken 
by  consent,  subject  to  the  opinion  of  the  court;  and  the  questions  thus 
raised  were  reserved,  and  assigned  to  the  determination  of  the  whole 
court.^ 

Sargent,  J.  That  the  case  presented  is  clearly  one  of  duress  there 
can  be  no  question.    The  abuse  of  any  process,  either  civil  or  criminal,^ 

1  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§ 
93-107. 

2  The  arguments  of  counsel  are  omitted. 


REAL   DEFENSES 


153 


to  compel  a  party^  by  imprisonment,  to  do  any  act  against  his  will  except 
to  pay  the  ck-bt'for  which  he  ITarrested,  is  entirely  illegal,  and  the  act 
maj  l)c  a\  oidcd  on  the  ground'bf  dur'css''.' ""Richardson  v.  Duncan,  3  N. 
H.  508 ;  Severance  v.  Kimball,"8  N.  H.  386;  Shaw  v.  Spooner,  9  N.  H. 
197,  32  Am.  Dec.  348;  Burnham  v.  Spooner,  10  N.  H.  532.  Breck  v. 
Blanchard,  22  N.  H.  303.  Here  the  arrest  was  without  any  warrant  or 
lawful  authority.  Such  duress  is  a  perfect  defense,  upon  all  the  au- 
thorities, to  an  action  between  the  original  parties. 

The  note  in  this  case  was  not  only  void  as  between  the  original 
p^iesTon'^ttTFground  of  duress,  but  was  given  to  compromise  a  charge 
of  crime,  and  was  wholly  illegal  upon  that  ground.  Plumer  v.  Smith, 
5  N.  H.  553,  22  Am.  Dec.  478.  But  the  principal  question  raised  here 
by  the  ruling  of  the  court  is  whether  such  a  note  is  absolutely  void  in 
the  hands  of  any  holder;  and  if  not,  then  another  question  arises  upon 
the  exception  which  was  taken  by  the  plaintiff,  which  is  this :  After 
an  indorsee  has  made  out  a  prima  facie  case  by  proving  the  indorse- 
ment, etc.,  and  the  defendant  has  shown  that  the  note  was  obtained 
from  him  by  duress,  upon  whom  rests  the  burden  of  proof?  Must  the 
defendant  prove  that  the  plaintiff  was  not  the  bona  fide  holder,  and  that 
he  did  not  pay  a  valid  consideration  for  it,  as  the  plaintiff  claimed? 
or,  the  duress  being  proved,  does  that  throw  the  burden  of  proof  upon 
the  plaintiff,  to  prove  how  he  came  by  the  note,  and  the  consideration 
he  paid,  etc.,  as  the  defendant  claims  ?  We  will  examine  these  questions 
in  the  order  in  which  we  have  stated  them. 

L  Isjhis  note  absolutely  void  in  the  hands  of  any  holder,  however 
innocent,  who  has  paid  a  valid  consideration  for  it  before  it~was  due? 
We  find  that  the  law  holds  certain  persons  to' be  incompetent  parties 
to  make  contracts,  on  account  of  want  of  capacity.     It  has,  therefore, 
wisely  taken  care  of  the  interests  of  those  who  either  have  not  judg- 
ment to  contract,  as  in  the  case  of  infants,  or  who,  having  judgment  to 
contract,  cannot  in  law  have  any  funds  or  property  to  enable  them  to 
perform  the  contract,  as  in  the  case  of  a  feme  covert ;  and  therefore  it 
has  in  general  rendered  the  contracts  of  infants  voidable,  and  those  of 
married  women  absolutely  void.    Ch.  on  Bills,  18.    By  our  law  an  in- 
fant has  not  capacity  to  bind  himself  absolutely  by  a  promissory  note, 
as  maker  or  indorser.    Story,  Prom.  Notes,  §  78.    So  a  married  woman 
is  incapable,  in  any  case,  of  becoming  a  party  to  a  note  or  bill  so  as  to 
charge  herself  with  any  obligation  whatever  ordinarily  arising  there- 
from.   So  contracts  made  with  an  alien  enemy  are  absolutely  void,  upon 
the  ground  of  disability  to  contract.     This  principle  has  its  origin  and 
confirmation  in  the  law  of  nations.     Persons  insane,  or  imbecile  in 
mind,  have  not  the  mental  capacity  to  contract.     This  disability  flows 
from  the  most  obvious  principles  of  natural  justice,  because  persons  in 
that  condition— lunatics,  idiots,  and  persons  non  compos  mentis— being 
bereft  of  their  reason,  are,  by  the  rules  not  only  of  municipal  law  but 
of  universal  justice,  held  to  be  utterly  incapable  of  making  contracts, 
and  generally  their  contracts  are  absolutely  void.    Story,  Prom.  Notes, 


154  DEFENSES 

§§  85,  94,  100,  101 ;  Edwards,  Bills  &  Notes,  c.  2.  There  are  some 
other  parties  that  are  held  to  be  incompetent  to  contract,  but  these  are 
the  principal;  and  there  are  also  some  exceptions  to  some  or  all  of  the 
general  rules  above  stated,  which  are  not  now  important  to  be  noticed. 
These  doctrines  are  all  familiar  as  elementary  principles. 

Contracts,  therefore,  purporting  to  be  entered  into  by  either  of  the 
above  parties,  are  either  void,  or  voidable,  as  the  case  may  be,  alike 
as  against  the  other  party  to  the  original  contract,  and  also,  where  the 
contract  is  assignable,  they  are  void  as  to  such  incompetent  parties,  or 
are  voidable  by  them,  in  the  hands  of  any  assignee  or  indorsee.  These 
rules  of  law  are  founded  upon  the  most  common  principles  of  natural 
justice  and  of  public  policy. 

There  are  numerous  other  contracts,  which,  though  made  between 
competent  parties   on  both  sides,  are  nevertheless  void   as   between 
such  original  parties.    A  contract  made  ori  Sunday^  where  the  transac- 
tion of  such  business  is  prohibitedlls  an  ilfegal  contract,  and  void  as  be- 
tween the  parties.    So  a  contract  based  upon  an  illegal  consideration — 
as  usury,  gaming  spirituous  liquors  sold  without  license  contrary  to 
laxv^the  compounding  of  a  felony,  etc. — is  void  as  between  the  parties. 
So  a  contract  without  consideration,  nudum  pactum,  and  one  where  the 
consideration  has 'failed,  as  between  the  "immediate  parties,  is  void  or 
voidable.     So  a  contract  entered  into  by  compulsion  under  duress,  or 
obtained  by  fraud,  or  circumvention  of  one  in  a  state  of  intoxication,  is 
void  as  between  the  parties.     Other  cases  might  be  stated  (see  Ch.  on 
Bills,  82-87),  but  these  are  sufficient  for  our  present  purpose.     Where 
the  contract  itself  is  illegal,  or  is  founded  upon  an  illegal  consideration, 
the  parties  are  usually  both  violators  of  the  law,  and  stand  in  pari 
delicto.     In  such  case  any  contract  for  the  payment  of  money  or  the 
performance  of  any  service  cannot  be  enforced  as  between  the  parties ; 
nor,  if  money  has  been  paid  or  property  transferred  by  one  party  to  the 
other  under  such  contract,  where  both  parties  are  alike  in  fault,  can 
it  be  recovered  back,  because  in  such  cases  "potior  est  conditio  possi- 
dentis."   But  in  cases  of  duress,  fraud,  or  circumvention,  the  fault  was 
all  upon  oneside,  and  the  innocent  party,  upon  whom  the  duress  or  the" 
fraud  was  practiced,  may  not  only  avoid  the  contract  entered  into  un- 
der these  circumstances,  but  if  he  pay  money,  or  deliver  property,  he 
may  recover  it  back  again.    Now  bills  and  notes  stand  upon  the  same 
foundation  as  all  other  contracts  do,  in  all  the  above  respects,  so  long 
as  they  remain  in  the  hands  of  the  original  payee. 

But  bills  and  notes  have  another  attribute,  which  other  contracts  or- 
dinarily do  not  possess;  that  is,  negotiability.  Where  a  bill  or  note 
has  been  negotiated,  and  passed  into  the  hands  of  a  bona  fide  holder 
before  it  is  due,  and  for  a  valuable  consideration,  in  such  case  the 
holder  acquires  rights  which  did  not  belong  tojhe  payee.  He  stands 
in  a  different  relation  to  the  promisor.  These  additional  rights  and 
privileges  have  been  conferred  upon  such  holder  by  law,  for  good  and 
sufficient  reasons,  too  well  known  and  understood  to  need  to  be  stated, 


EEAL  DEFENSES  I'^a 

but  which  are  incident  to  and  dependent  upon  the  attribute  of  nego- 
tiabihty,  which  these  instruments  possess.  And  it  may  be  laid  down  as 
the  general  rule,  as  the  general  principle  applying  to  this  class  of  cases, 
that  such  a  note,  thus  negotiated  and  in  the  hands  of  such  a  holder,  is 
not  liable  to  any  defense  which  the  maker  had  as  against  the  original 
payee.     To  this  general  rule  there  are  some  exceptions,  among  which 

are: 

1.  When  a  statute  not  only  prohibits  the  making  of  a  contract,  but 
pro>t?tgOl35£-tKs' 'same  sTiall  be  void  to  alTintcnts  and  purposes,  or 
where  tlie  law  provides  that  any  contract  macle  or  securities  given  upon 
any  illegal  consideration  shall  be  absolutely  void,  then  the  note  which 
embodies  such  contract,  or  is  based  upon  such  consideration,  is  held 
void,  everywhere  and  in  the  hands  of  every  holder.  In  England,  and 
in  most  of  the  United  States,  there  are  or  have  been  laws  against  usury, 
which  not  only,  by  a  general  prohibition  of  usury,  made  that  an  illegal 
consideration  for  a  note,  but  also  provided  that  all  bills  or  notes 
founded  upon  such  a  consideration  should  be  absolutely  void.  Such, 
however,  is  not  the  law  in  this  state  on  that  subject,  and  it  is  believed 
that  we  have  no  statutes  with  similar  provisions.  Hence  here  usury 
may  be  a  good  defense  to  a  note  as  against  the  original  party,  but  not 
as  against  an  innocent  indorsee,  for  value,  etc. 

2.  When  the  note  is  a  forgery,  it  is_void  everywhere. 

3.  When  the  maker  belongs  to  a  class'ol  persons  who  are  ordinarily, 
and  as  a  general  rule,  on  grounds  of  public  policy,  held  incompetent 
to  contract  at  all,  such  as  infants,  married  women,  alien  enemies,  and 
insane  persons,  including  spendthrifts  and  others  under  guardianship, 
who  have  been  by  some  statute  declared  incompetent  to  contract, 

4.  Notes  signed,  by  agents  without  authority. 

In  none  of  these  cases  (except  the  first,  which,  as  we  have  seen,  does 
not  apply  in  this  state)  is  a  note  valid  in  the  hands  of  any  one ;  and  the 
party  who  discounts  such  paper  is  bound  to  inquire,  at  his  peril,  wheth- 
er  the  nole'^ered  to  him  Is  signed  by  a  party  capable  and  competent 
in  law  to  bind  himself,  or  by  an  agent  duly  authorized  to  bind  his 
principal.  Beside  this,  he  is  bound  to  inquire  whether  the  party  from 
whom  he  receives  it  is  competent  to  make  such  transfer  in  his  own 
right,  or  is  authorized  to  do  it  for  his  principal,  for  whom  he  assumes 
to  act. 

If  there  is  a  failure  in  either  of  these  points  of  capacity  or  authority, 
it  will  not  avail  the  party  that  he  is  a  bona  fide  holder,  for  value,  with- 
out notice.  He  must  look  to  his  indorser  if  he  has  one,  and  if  he  has 
not  he  must  suffer  loss. 

5.  Another  case  might  be  mentioned,  which  has  been  made  an  ex- 
ception to  the  general  rule  above  stated  by  express  provisions  of  the 
statute — as  where  a  note  is  attached  by  the  trustee  process.  There,  by 
operation  of  the  statute,  the  maker  of  a  note  may  have  a  perfect  defense 
against  an  indorsee,  for  value,  without  notice,  and  before  due.  So 
notes  discharged  by  operation  of  insolvent  laws  might  afterward  be 


156  DEFENSES 

transferred,  by  possibility,  so  as  to  form  another  exception,  where  the 
indorsee,  holding  the  note  bona  fide,  etc.,  might  be  met  with  a  perfect 
defense  on  the  part  of  the  maker.  But  these  last  cases  throw  no  light 
upon  the  question  we  are  considering.  These  are  the  principal,  perhaps 
all,  the  exceptions  to  the  general  rule  above  stated,  that  no  defense  is 
available  against  an  innocent  indorsee,  for  value  paid  before  due.  But 
where  the  contract  was  illegal,  being  prohibited  by  law,  or  the  consid- 
eration was  illegal,  as  usury,  wagers,  compounding  a  felony,  restraint 
of  trade  or  of  marriage,  etc.,  or  where  there  was  a  want  or  failure  of 
consideration,  and  even  where  the  note  has  been  paid — all  these  de- 
fenses, and  many  more,  cannot  be  made  against  the  note  in  the  hands 
of  such  a  holder.  And  the  question  here  raised  is  whether,  in  case  of 
duress  or  fraud,  where  there  is  mala  fides,  but  it  is  all  on  one  side,  and 
the  other  party  to  the  note  has  been  induced  to  sign  it  by  force  or  by 
fraud,  and  is  in  every  respect  an  innocent  party,  such  defense  shall  avail 
him  as  against  such  a  holder,  for  value,  etc.,  who  seeks  to  collect  it. 

And  we  think  such  a  defense  cannot  avail  the  maker  against  such  an 
indorsee  of  the  note.  The  authorities  favor  this  view.  Kent,  in  his 
Commentaries  (volume  2,  §  39),  speaks  of  contracts  generally,  and  on 
page  453  says :  "If  a  contract  be  entered  into  by  means  of  violence 
offered  to  the  will,  or  under  the  influence  of  undue  constraint,  the  party 
may  avoid  it  by  plea  of  duress ;  and  it  is  requisite  to  the  validity  of 
every  agreement  that  it  be  the  result  of  a  free  and  bona  fide  exercise 
of  the  will.  Nor  will  a  contract  be  valid  if  obtained  by  misrepresenta- 
tion or  concealment,"  etc. 

He  here  speaks  evidently  of  the  contract  as  between  the  original 
parties  to  it,  or  of  contracts  in  general  as  distinguished  from  nego- 
tiable notes  and  bills ;  because  he  devotes  another  chapter  especially  to 
a  consideration  of  bills  and  notes,  in  which  he  says,  in  speaking  of  the 
right  of  the  holder  (volume  3,  pp.  79,  80),  that  a  bona  fide  holder  can 
recover  upon  such  note,  though  it  came  to  him  from  a  person  who  had 
stolen  or  robbed  it  from  the  true  owner,  provided  he  took  it  innocently 
in  the  course  of  trade,  for  a  valuable  consideration,  and  under  circum- 
stances of  due  caution;  and  he  need  not  account  for  his  possession  of 
it  unless  suspicion  be  raised.  This  doctrine  is  founded  on  the  commer- 
cial policy  of  sustaining  the  credit  and  circulation  of  negotiable  paper. 
Suspicion  must  be  cast  upon  the  title  of  the  holder  by  showing  that  the 
instrument  had  got  into  circulation  by  force  or  fraud,  before  the  onus  is 
cast  upon  the  holder  of  showing  the  consideration  he  gave  for  it. 

Chitty  says  (Ch.  on  Bills,  72) :  "In  general  there  will  be  a  sufificient 
defense  between  the  original  parties  when  the  bill  or  note  was  obtained 
by  duress,  or  by  fraud,  or  by  circumvention,"  etc.  But  he  nowhere 
intimates  that  any  of  these  defenses  would  be  good  against  an  innocent 
indorsee;  but,  on  the  contrary,  he  expressly  says  (page  79):  "The 
circumstance  of  a  bill  or  note  having  been  obtained  without  adequate 
consideration,  or  even  by  duress  or  fraud,  or  misapplied  by  an  agent_^ 
to  his  own  use,  affords  no  defense  where  the  instrument  comes  into 


EEAL   DEFENSES  157 

\\\e  possession  of  ^a  bona  fide  holder,  £or  value,  without  notice,  and  be- 
fore it  is  due." 

bo  irTEdwards  on  Bills  and  Promissory  Notes  (page  325)  it  is  said 
that  "between  the  immediate  parties  it  may  be  shown,  by  way  of  de- 
fense, that  a  bill  or  note  was  obtained  by  duress,  or  by  fraud,  or  by  cir- 
cumvention," etc. ;  but  he  nowhere  intimates  that  any  of  those  cir- 
cumstances would  constitute  an  exception  to  the  rule  which  he  states 
(page  56),  that  the  bona  fide  holder  of  negotiable  paper,  who^has  paid 
value  for  it  before  its  jiaturlty,  or  who  has  relinquished  some'available^ 
security  or  valuable  rights  on  tlie  credit  thereof,  is  entitled  to  protec- 
tion, and  may  recover  thereon  notwithstanding  some  of  the  previous 
holders  procured  the  same  by  fraud. 

So  in  Story  on  Promissory  Notes  (section  188)  it  is  said,  under  the 
head  of  want  of  consideration,  that  notes  obtained  under  duress  are 
void ;  but  it  is  also  said  (section  191)  that  the  want  or  failure  of  con- 
sideration, or  mere  fraud  between  the  antecedent  parties,  will  be  no  de- 
fense or  bar  to  the  title  of  a  bona  fide  holder  of  the  note,  for  value,  etc. 
Now  we  are  not  able  to  see  what  distinction  there  could  be,  in  fact,  be- 
tween a  note  the  signature  to  which  was  obtained  by  fraud  and  one 
where  the  signature  was  obtained  by  duress.  Both  are  equally  void  as 
between  the  original  parties ;  and  there  can  be  no  better  reason  in  the 
one  case  for  holding  the  note  void  in  the  hands  of  a  bona  fide  holder 
than  in  the  other.  "It  is  requisite  to  the  validity  of  every  agreement 
that  it  be  the  result  of  a  free  and  bona  fide  exercise  of  the  will."  2 
Kent,  Com.  453,  ante.  Upon  this  ground,  fraud  in  obtaining  the  sig- 
nature would  be  fatal  to  precisely  the  same  extent  as  would  duress ; 
there  would  be  no  "free  and  bona  fide  exercise  of  the  will"  in  the  one 
case  more  than  in  the  other. 

In  Doe  V.  Burnham,  31  N.  H.  431,  the  rule  is  laid  down  very  broadly, 
and  without  those  qualifications  and  exceptions  which  we  have  hereto- 
fore seen  must  necessarily  always  accompany  it.  Eastman,  J.,  deliver- 
ing the  opinion  in  that  case,  says  that,  where  a  note  is  indorsed  in 
the  usual  and  ordinary  course  of  commercial  business,  all  the  authori- 
ties "sustain  the  broad  rule  that  a  bona  fide  holder  for  a  valuable  con- 
sideration, who  becomes  such  before  the  dishonor  of  the  note,  takes 
it  free  from  all  defenses  between  prior  parties."  And  see  cases  there 
cited.  He  also  quotes  Shaw,  C.  J.,  in  Wheeler  v.  Guild,  20  Pick.  545, 
32  Am.  Dec.  231,  as  stating  the  rule  in  Massachusetts  substantially  irk 
the  same  way,  and  then  adds :  "We  are  not  aware  that  in  this  state 
there  is  any  exception  to  the  universality  of  the  rule." 

Now  this  rule,  in  the  general  and  broad  terms  in  which  it  is  here  laid 
down,  is  at  once  seen  to  be  incorrect,  because  in  case  of  notes  forged, 
or  signed  by  an  agent  having  no  authority,  or  by  an  infant,  a  married 
woman,  an  alien  enemy  in  time  of  war,  or  an  insane  person,  exceptions 
to  this  rule  have  been  seen  to  exist  necessarily.  But  if  the  intention 
was  merely  to  state  a  general  rule,  subject  to  such  limitations  and  ex- 
ceptions as  general  rules  are  usually  subject  to,  it  is  undoubtedly  cor- 


158  DEFENSES 

rect ;  and  in  that  view  it  is  broad  enough  to  cover  our  present  case, 
because  in  this  case  the  signature  to  the  note  is  genuine,  and  no  forgery. 
No  question  of  agency  or  authority  arises,  nor  does  the  signer  belong 
to  either  of  the  classes  whom  the  law  holds  incompetent  to  contract. 

Suppose  an  individual,  then,  were  about  to  purchase  a  note  payable 
to  -bearer,  before  it  was  due,  and  pay  a  fair  equivalent  for  it,  with  a 
view  of  collecting  it  of  the  maker,  and  where  he  is  to  have  no  indorser 
to  rely  upon;  what  would  be  his  duty  in  order  to  proceed  safely? 
First,  he  must  assure  himself  of  the  genuineness  of  the  signature,  or,  if 
it  purported  to  be  signed  by  an  agent,  he  must  assure  himself  that  the 
agent  was  duly  authorized  to  bind  his  principal  in  that  particular ;  sec- 
ondly, he  must  make  such  inquiries,  which,  ordinarily,  he  may  easily 
do,  as  to  ascertain  that  the  signer  is  not  an  infant,  a  married  woman, 
an  alien  enemy,  an  insane  person,  etc. — that  he  does  not  belong  to  a 
class  of  persons  who  are  always  presumed  by  the  law  to  be  incompetent 
to  contract ;  and,  thirdly,  he  might  need,  for  his  own  safety,  to  inquire 
whether  the  signer  of  the  note  had  been  trusteed,  or  whether  any  other 
special  statute  could  affect  his  claim  to  it.  When  he  has  satisfied  him- 
self upon  these  points,  if  he  learns  of  no  other  defects  and  the  signer 
is  of  sufficient  ability  to  respond,  he  may  purchase ;  and  there  is  gen- 
erally very  little  trouble  in  ascertaining  these  facts.  They  are  usually 
matters  of  public  notoriety,  about  which  there  can  be  little  room  for 
mistake. 

But  suppose  that,  after  being  satisfied  upon  all  these  points,  and  hav- 
ing purchased  the  note,  it  should  prove  that  it  was  ah  illegal  contract, 
or  was  for  an  illegal  consideration;  who  shall  suffer,  the  maker,  or  the__ 
indorsee?  This  is  settled  on  the  best  of  authority.  The  original  par- 
ties stood  upon  equal  ground,  both  being  in  fault,  and  could  neither 
of  them  enforce  the  contract;  yet  neither  shall  be  allowed  to  take  ad- 
vantage of  his  own  wrong  as  against  an  innocent  indorsee. 

And  suppose' it  should  turn  out  that  his  note  was  obtained  of  the 
maker  by  fraud  or  by  duress,  a  case  in  which  the  maker  was  in  no 
fault;  what  rule  shall  be  applied  here?  The  long-established  one,  that 
where  one  of  two  innocent  persons  must  suft'er  the  loss  should  fall  upojf 
him  who  has  suffered  a  negotiable  s"ecurity,  withj-iis  name  attachejd  to_ 
it,  to  get  into .  circulation,  and  thereby,  mislead  the  indorsee.,  Such 
rules,  and  such  an  application  of  them,  are  necessary  to  give  security 
to  negotiable  paper. 

The  defendant's  counsel  claim  that  the  same  rule  that  would  hold  the 
maker  of  a  note,  who  signed  it  under  duress,  to  pay  it  to  the  innocent 
holder,  for  value,  would  hold  infants,  and  others  who  are  incompetent 
to  contract,  to  pay  their  notes  when  thus  held ;  but  this  is  neither  a  legal 
nor  a  logical  sequence.  The  infant  belongs  to  a  class,  all  of  whom  are 
held  by  law  to  be  incompetent  to  bind  themselves  by  their  contracts.  In 
the  other  case,  the  man  belongs  to  a  class  amply  competent  to  contract, 
is  under  no  general  disability  as  the  infant  is,  is  never  to  be  presumed 
to  have  signed  any  note  under  duress,  because  that  is  a  condition  never 


REAL   DEFENSES  liii) 

to  be  presumed  in  case  of  a  free  man,  who  may  have  signed  a  thousand 
notes  an.l  never  have  signed  but  this  one  under  duress.  Is  suspicion 
to  be  cast  upon  all  notes  that  are  known  to  be  properly  signed,  and 
against  men  under  no  disability,  simply  because  it  is  possible  that  such 
a  note  may  be  obtained  by  duress  or  fraud? 

Take  also  the  case  of  a  slave.  There  the  general  rule  is  that  he  is  in- 
competent to  contract;  and  if  a  man  were  about  to  purchase  a  note, 
and,  upon  inquiry  as  to  who  the  signer  was,  should  learn  that  he  was 
a  slave,  that  would  be  sufficient  notice  to  him  that  the  note  was  void, 
because  all  contracts  made  by  all  slaves  usually  are  so,  because  while  in 
that  condition  they  must  necessarily  be  constantly  under  duress  of 
body,  mind  and  will.  But  when  it  is  ascertained  that  the  signer  is  a 
free  man,  then  the  presumption  is  that  he  is  never  under  duress,  and 
there  are  only  rare  exceptions  to  this  general  rule;  and  to  say  that  in 
such  exceptional  cases  the  maker  shall  be  allowed  to  stand  upon  such  a 
defense  against  an  innocent  holder  for  value,  taking  it  in  the  ordinary 
course  of  mercantile  business  before  the  maturity  of  the  note,  would  be 
to  overthrow  all  confidence  in  negotiable  paper,  and  entirely  reverse  the 
policy  of  the  whole  system  of  mercantile  law.  The  exception  to  the 
ruling  of  the  court  upon  this  point  must  be  sustained;  but  we  shall 
hnd  that  the  numerous  authorities  which  bear  upon  the  next  question  to 
be  considered  have  also  a  direct  bearing  upon  this  point. 

II.  Next  let  us  inquire,  upon  whom  is  the  burden  of  proof,  after 
duress,  or  fraud,  or  illegality  of  consideration  is  proved?  Must  the 
defendant  not  only  prove  that  he  had  a  perfect  defense  to  the  note 
originally,  but  also  show  that  the  indorsee  had  notice  of  the  defect,  or 
that  he  paid  no  consideration  for  it,  or  that  he  is  not  in  some  way  the 
bona  fide  holder  of  the  note  ?  Or  must  the  plaintiff,  after  such  defense 
to  the  original  contract  is  proved,  assume  the  burden  of  proving  that 
he  is  a  bona  fide  holder,  for  a  valuable  consideration,  without  notice 
of  any  defect,  and  that  it  came  seasonably  into  his  hands? 

In  Collins  v.  Martin,  1  B.  &  P.  651,  Eyre,  C.  J.,  says:  "No  want  of 
consideration,  or  other  ground  to  impeach  the  apparent  value  received, 
was  ever  admitted  in  a  case  between  an  acceptor  or  drawer  and  a  third 
person  holding  the  bill  for  value;  and  the  rule  is  so  strict  that  it  will 
be  presumed  that  he  does  hold  for  value  till  the  contrary  appears.  The 
onus  probandi  lies  on  the  defendant."  This  case  is  cited  approvingly 
in  Doe  v.  Burnham,  31  N.  H.  432,  though  the  question  we  are  now 
considering:  was  not  there  raised.  But  the  case  of  Collins  v.  Martin 
goes  further  than  this,  and  holds  that  where  the  defendant  has  first 
proved  that  the  note  or  acceptance  had  been  obtained  by  felony,  by 
fraud,  or  by  duress,  that  so  far  tended  to  throw  suspicion  upon  the 
indorsement  as  to  call  on  the  plaintiff,  the  indorsee,  to  prove  that  he 
paid  value  for  it. 

This  is  unquestionably  the  correct  rule,  as  also  stated  by  Parker,  J., 
in  Heath  v.  Sansom,  2  B.  &  Ad.  291,  although  the  majority  of  the 
court  in  that  case  came  to  a  somewhat  dilYerent  conclusion,  and  held 


IGO  DEFENSES 

that  "in  all  cases  where,  from  defect  of  consideration,  the  original 
payees  cannot  recover  upon  the  note  or  bill,  the  indorsee,  to  maintain 
an  action  against  the  maker  or  acceptor,  must  prove  consideration  given 
by  himself,  or  a  prior  indorsee."  The  same  doctrine  is  held  in  Brown 
V.  Philpot,  2  M.  &  Rob.  285. 

But  these  decisions  were  soon  overruled,  so  far  as  a  mere  want  or 
failure  of  consideration  was  concerned. 

In  Bailey  v.  Bidvvell,  13  M.  &  W.  73,  it  was  held  by  the  Court  of 
Exchequer  that  if,  to  an  action  on  a  bill  or  note,  the  defendant  pleads 
that  it  was  illegal  in  its  inception,  and  that  the  plaintiff  took  it  without 
value,  the  illegality  being  proved,  the  onus  is  cast  upon  the  plaintiff 
of  proving  that  he  gave  value.  The  reason  of  the  rule  is  there  stated 
by  Parke,  B.,  who  says :  "It  certainly  has  been,  since  the  later  cases, 
the  universal  understanding  that  if  the  note  were  proved  to  have  been 
obtained  by  fraud,  or  affected  by  illegality,  that  afforded  a  presumption 
that  the  person  who  had  been  guilty  of  the  illegality  would  dispose  of 
it,  and  place  it  in  the  hands  of  another  person  to  sue  upon  it,  and  that 
such  proof  casts  upon  the  plaintiff  the  burden  of  showing  that  he  was 
a  bona  fide  indorsee  for  value."  Alderson,  B.,  adds:  "It  appears  to 
me  that,  though  the  defendant  is  bound  to  aver  in  his  plea  both  the 
illegality  and  want  of  consideration,  yet  if  he  proves  the  illegality,  and 
the  plaintiff  does  not  prove  the  giving  of  the  consideration,  the  plea  is 
maintained." 

And  in  Smith  v.  Braine,  in  the  Queen's  Bench,  3  E.  L.  &  E.  379, 
Campbell,  C.  J.  says:  "But  since  the  new  rules,  judges  have,  with  en- 
tire approbation,  directed  juries  that  where  the  bill  was  illegal  in  its 
inception,  or  where  the  immediate  indorser  to  the  plaintiff  obtained 
possession  of  it  by  fraud,  the  want  of  consideration  as  between  him  and 
the  plaintiff  may  be  presumed." 

In  Duncan  v.  Scott,  1  Camp.  100,  which  was  an  action  by  the  in- 
dorsee against  the  drawer  of  a  bill,  the  defendant  had  given  the  bill 
without  consideration,  and  while  under  duress.  Lord  Ellenborough 
held  that,  upon  these  facts  being  proved  by  the  defendant,  the  plaintiff 
must  prove  that  he  gave  value  for  it  before  he  could  recover,  even 
though  it  was  indorsed  to  him  before  it  becarne  due. 

Rees  v.  Headfort,  2  Camp.  574,  was  an  action  by  an  indorsee  against 
the  acceptor  of  a  bill.  The  drawer  had  received  no  consideration,  but 
had  been  tricked  out  of  the  bill  by  a  gross  fraud.  Upon  proof  of  these 
facts  by  the  defendant.  Lord  Ellenborough  held  that  it  was  incumbent 
on  the  plaintiff  to  show  some  consideration  paid  for  the  bill ;  and,  not 
doing  so,  he  was  nonsuited. 

Bayley,  in  his  work  on  Bills  (page  372),  says:  "In  many  cases  the 
plaintiff  is  compellable  to  prove  that  either  he,  or  some  preceding  par- 
ty, took  the  note  bona  fide,  or  for  value — as  in  case  of  a  bill  or  note 
originally  given  without  consideration,  and  while  the  person  giving  it 
was  under  duress,  or  in  case  of  a  bill  or  note  obtained  by  fraud,  or  in 


REAL   DEFENSES  101 

case  of  a  delivery  by  a  person  not  entitled  to  make  it,  as  in  the  instance 
of  bills  or  notes  that  have  been  stolen  or  lost." 

In  Mills  V.  Barber,  1  M.  &  W.  425,  Lord  Abinger,  C.  B.,  says: 
"Where  there  is  no  fraud,  nor  any  suspicion  of  fraud,  but  the  simple 
fact  is  that  the  defendant  received  no  consideration  for  his  acceptance, 
the  plaintiff  is  not  called  upon  to  prove  that  he  gave  value  for  the  bill ; 
but  if  the  bill  be  connected  with  some  fraud,  and  a  suspicion  of  fraud 
be  raised  from  its  being  shown  that  something  has  been  done  with  it 
of  an  illegal  nature,  or  that  it  has  been  clandestinely  taken  away,  or 
has  been  lost  or  stolen,  the  holder  will  be  required  to  show  that  he  gave 
value  for  it."  And  (page  432)  "if,  in  an  action  by  an  indorsee  against 
the  acceptor  of  a  bill,  the  ground  of  defense  be  that  the  bill  was  ob- 
tained illegally  from  the  defendant,  and  indorsed  to  the  plaintiff  with- 
out consideration,  the  defendant  will  be  bound  in  his  plea  to  aver  both 
the  illegality  and  the  want  of  consideration ;  and  if,  at  the  trial,  he 
proves  the  illegality,  such  proof  will,  according  to  the  rule  above  stated, 
throw  upon  the  plaintiff  the  onus  of  showing  that  he  gave  considera- 
tion for  the  bill."  The  same  doctrine  is  held  in  Bingham  v.  Stanley, 
2  A.  &  E.  (N.  S.)  117;  Berry  v.  Alderman,  24  E.  L.  &  E.  318. 

In  De  La  Chaumette  v.  Bank  of  England,  9  B.  &  C.  208,  where  the 
defendant  had  proved  that  the  bill  was  stolen,  it  was  held  that  it  was 
incumbent  on  the  plaintiff  to  show  that  the  foreign  merchant,  who  as- 
signed it  to  him,  gave  full  value  for  it. 

In  Harvey  v.  Towers,  4  E.  L.  &  E.  551,  6  Exch.  656,  Pollock,  C.  B., 
says :  "This  is  an  action  on  a  bill  of  exchange,  with  a  plea  of  fraud, 
which,  according  to  the  ordinary  course  of  pleading,  contains  an  allega- 
tion not  merely  of  the  fraud  in  obtaining  the  bill,  but  that  the  plaintiff' 
gave  no  consideration  for  it.  In  point  of  law,  that  last  allegation  was 
necessary  to  make  the  pica  a  perfect  answer  to  the  action ;  for  though 
a  bill  of  exchange  may  have  been  originally  concocted  in  fraud,  or  ob- 
tained by  fraud,  though  it  may  have  been  stolen,  or  a  party  may  have 
been  swindled  out  of  it,  this  is  no  defense  to  an  action  by  the  holder 
unless  he  has  obtained  it  without  giving  value,  and  he  may  sue  on  it 
notwithstanding  such  defect  in  the  title  of  some  one  else."  He  also 
holds  that  proof  of  fraud  alone,  by  the  defendant,  is  a  sufficient  sus- 
taining of  this  plea  to  throw  upon  the  plaintiff  the  burden  of  proving 
consideration;  and  where  there  is  evidence  of  fraud  for  a  jury,  the 
judge  should  call  on  the  plaintiff"  for  such  proof,  with  instructions  to 
the  jury  that,  if  they  find  the  fact  of  fraud  proved,  the  plaintiff'  must 
satisfy  them  that  he  gave  consideration  for  the  bill. 

In  accordance  with  the  doctrine  of  these  cases  last  cited  is  Green- 
leaf  on  Evidence  (section  172),  where  it  is  said :  "In  an  action  by  the 
indorsee  against  the  original  party  to  the  bill,  if  it  is  shown  on  the  part 
of  the  defendant  that  the  bill  was  made  under  duress,  or  that  he  was 
defrauded  of  it,  or  if  a  strong  suspicion  of  fraud  be  raised,  the  plaintiff 
will  then  be  required  to  show  under  what  circumstances  and  for  what 
Moore  Cases  B.&  N. — 11 


162  DEFENSES 

value  he  became  the  holder.  It  is,  however,  only  in  such  cases  that  this 
proof  will  be  demanded  of  the  holder.  It  will  not  be  required  where  the 
defendant  shows  nothing  more  than  a  mere  absence  or  want  of  consid- 
eration on  his  part."  See  also  Bramah  v.  Roberts,  1  Bing.  N.  C.  469; 
Low  v.  Chifney,  1  Bing.  N.  C.  267. 

So  in  2  Phil.  Ev.  (4  C.  &  H.)  8,  it  is  said  that  in  some  cases  the 
plaintiff,  in  an  action  upon  a  bill  of  exchange  or  promissory  note,  must 
prove  that  he  or  some  preceding  party  took  the  bill  or  note  bona  fide, 
and  for  value,  as  where  bills  or  notes  have  been  obtained  by  fraud,  or 
under  duress,  or  have  been  stolen  or  lost.  When  the  plaintiff  has  es- 
tablished a  prima  facie  case,  it  then  remains  for  the  defendant,  if  he 
can,  to  impeach  his  title ;  and  until  he  has  first  cast  some  suspicion  on 
the  title  by  showing  that  the  note  was  lost,  or  obtained  by  force  or 
fraud,  he  cannot  cast  the  burden  of  proof  upon  the  plaintiff.  See,  also, 
Heyden  v.  Thompson,  1  A.  &  E.  210;  1  Saund.  on  PI.  &  Ev.  304,  305 ; 
Ch.  on  Bills,  79;    Bayley  on  Bills,  500. 

And  in  Smith's  Mercantile  Law,  320,  it  is  said  that  the  defenses  of 
duress,  fraud,  etc.,  will  not  prevail  against  a  bona  fide  holder. 

The  same  doctrines  very  generally  prevail  in  this  country,  wherever 
the  subject  has  received  judicial  consideration.  Munroe  v.  Cooper,  5 
Pick.  (Mass.)  412;  Woodhull  v.  Holmes,  10  Johns.  (N.  Y.)  231;  Val- 
lett  v.  Parker,  6  Wend.  (N.  Y.)  615;  Small  v.  Smith,  1  Denio  (N.  Y.) 
583 ;  Worcester  County  Bank  v.  D.  &  M.  Bank,  10  Cush.  (Mass.)  488, 
57  Am.  Dec.  120;  Wyer  v.  D.  &  M.  Bank,  11  Cush.  (Mass.)  52,  59 
Am.  Dec.  137;  Rockwell  v.  Charles,  2  Hill  (N.  Y.)  499;  Bissell  v. 
Morgan,  11  Cush.  (Mass.)  198;  Crosby  v.  Grant,  36  N.  H.  273.  So 
in  Smith  on  Cont.  (3d  Am.  Ed.)  277  (*187),  in  a  note  by  Rawle,  it  is 
said  that  in  New  York  it  has  been  held  that,  as  soon  as  the  defendant 
shows  there  has  been  usury  between  the  prior  parties,  he  casts  on  the 
plaintiff  the  burden  of  proving  that  he  is  a  holder  for  value,  as  is  the 
case  in  every  instance  where  fraud,  duress,  or  illegality  is  shown  be- 
tween the  prior  parties. 

These  authorities  would  seem  conclusive  that  the  plaintiff's  exception 
— that  the  evidence  offered  would  have  been  no  defense  unless  it  were 
proved  that  he  was  not  the  bona  fide  holder — must  be  overruled.  When 
the  defendant  had  proved  the  duress,  he  had  made  a  good  defense  as 
against  the  original  party;  and  because  of  the  legal  presumption  that 
in  such  cases  the  payee,  being  guilty  of  such  illegality,  would  dispose 
of  the  note  and  place  it  in  the  hands  of  some  other  person  to  sue  upon 
it  (Bailey  v.  Bidwell,  supra),  he  had  thereby  cast  a  suspicion  on  the 
plaintiff's  title,  which  threw  the  burden  upon  him  of  showing  affirma- 
tively that  he  was  a  bona  fide  holder  for  value.  Nor  can  we  see  that 
the  fact  that  this  evidence  was  offered  under  the  general  issue  alters 
the  position  of  the  parties  or  the  state  of  the  case. 

These  authorities  also  bear  directly  upon  the  first  point  taken  by  the 
defendant  that  duress  is  a  defense  against  any  holder,  however  innocent 
he  may  be,  and  however*  valuable  a  consideration  he  may  have  paid 


REAL   DEFENSES 


103 


for  the  note ;  and  if  other  authorities  on  this  point  were  needed  they 
STe~n6rwan^mgr~  In  Powers  v.  Ball,  27  Vt.  662,  Redfield,  C.  J.,  says: 
"inegaHty,  duress,  fraud,  and  want  or  failure  of  consideration  are  no 
defenses  as  against  a  bona  fide  holder  for  value."  See,  also,  St.  Albans 
Bank  v^  Dillon,  30  Vt.  122,  73  Am.  Dec.' 295;  Ellicott  v.  Martin,  6  Md. 
509,  61  Am.  Dec.  327;  IMincll  v.  Reed,  26  Ala.  730;  Norris  v.  Langley, 
19  N.  H.  423  ;  Knight  v.  Pugh,  4  Watts  &  S.  (Pa.)  445,  39  Am.  Dec.  99. 
The  verdict  must  be  set  aside,  and  a  new  trial  granted. 


GEO.  ALEXANDER  &  CO.  v.  HAZELRIGG. 

(Court  of  Appeals  of  Kentucky,  190G.     123  Ky.  G77,  97  S.  W.  353.) 

This  action  was  instituted  by  appellant,  doing  business  as  Geo.  Alex- 
ander &  Co.,  against  the  appellee,  upon  the  following  promissory  note : 
"$1,592.90.  Alt.  Sterling,  Ky.,  Sept.  14th,  1904.  Sixty  days  after  date, 
we  jointly  and  severally  promise  to  pay  to  Desha  Lucas,  or  order,  fif- 
teen hundred  and  ninety-two  and  ^V^*''*  dollars,  negotiable  and  payable 
at  the  Montgomery  National  Bank,  Mt.  Sterling,  Ky.,  value  received, 
with  interest  at  6  per  cent,  per  annum.  [Signed]  John  W.  Hazel- 
rigg."     From  a  judgment  in  favor  of  defendant,  plaintiff  appeals.^ 

NuNN,  J.  The  real  question  to  be  determined  is  whether  a  negotia- 
ble note  executed  for  money  lost  on  a  bet  or  wager  can  be  successfully 
defended,  when  owned  and  held  by  an  innocent  purchaser  for  value 
without  notice  of  thje.  infirmity  or  illegal  consideration  of  the  note.  As 
we  understand  the  appellant's  petition,  he  concedes  that  prior  to  the 
passage  and  the  taking  eft'ect  of  the  negotiable  instrument  act,  referred 
to,  such  a  note  could  be  successfully  defended  in  the  hands  of  an  inno- 
cent purchaser ; .  but  since  that  act  took  effect  he  contends  that  all  laws 
inconsistent  with  that  act  stood  repealed.  He  claims  that  under  sec- 
tion 57  the  question  of  consideration  cannot  be  inquired  into  as  against 
the  holder  in  due  course.  He  takes  the  paper  free  from  defenses. 
And  in  support  of  this  position  we  are  referred  to  the  case  of  Wirt 
V.  Stubblefield,  17  App.  D.  C.  283.  In  that  case  it  was  held  that  the 
section,  the  same  as  section  57  referred  to  above,  changed  the  law  of 
the  District  of  Columbia  as  to  a  note  given  for  a  gambling  debt  in 
the  hands  of  a  holder  in  due  course;  the  court  saying:  "We  know, 
moreover,  that  the  great  and  leading  object  of  the  act,  not  only  with 
Congress,  but  with  the  larger  number  of  the  principal  states  of  the 
Union  that  have  adopted  it,  has  been  to  establish  a  uniform  system  of 
law  to  govern  negotiable  instruments  wherever  they  might  circulate  or 
be  negotiated.  It  was  not  only  uniformity  of  rules  and  principles  that 
was  designed,  but  to  embody  in  a  codified  form,  as  fully  as  possible,  all 
the  law  upon  the  subject,  to  avoid  conflict  of  decisions,  and  the  effect 

3  The  statement  of  the  case  is  taken  from  the  opinion  of  the  court.     Part 
of  the  opinion  is  omitted. 


104  DEFENSES 

of  mere  local  laws  and  usages  that  have  hitherto  prevailed.  The  great 
object  sought  to  be  accomplished  by  the  enactment  of  the  statute  is  to 
free  the  negotiable  instrument  as  far  as  possible  from  all  latent  local 
infirmities  that  would  otherwise  inhere  in  it  to  the  prejudice  and  disap- 
pointment of  innocent  holders  as  against  all  the  parties  to  the  instru- 
ment professedly  bound  thereby.  This  clearly  could  not  be  effected 
so  long  as  the  instrument  was  rendered  absolutely  null  and  void  by 
local  statute." 

It  has  been  the  policy  of  this  state  to  suppress  gaming,  and  the  stat- 
utes making  gaming  contracts  void  are  founded  up"on  what  the  Legis- 
lature has  for  many  years  deemed'to  be  sound  public  policy.  It  is  in- 
conceivable that  the  General  Assembly,  in  the  passage  of  the  act  of 
1904  for  the  protection  of  innocent  holders  of  negotiable  instruments, 
intended  to  or  did  repeal  section  1955,  Ky.  St.  1903,  which  declares  all 
gaming  contracts  void.  In  our  opinion,  the  disappointment  now  and 
then  of  an  innocent  holder  of  a  negotiable  instrument  would  not  be  as 
hurtful  and  injurious  to  the  best  interests  of  the  state  as  the  removal  of 
the  ban  from  gaming  contracts.  Air.  Daniel,  in  his  work  on  Negotiable 
Instruments  (section  197),  says :  "The  bona  fide  holder  for  value,  who 
has  received  the  paper  in  the  usual  course  of  business,  is  unaffected  by 
the  fact  that  it  originated  in  an  illegal  consideration,  without  any  dis- 
tinction between  cases  of  illegality  founded  in  moral  crime  or  turpitude, 
which  are  termed  mala  in  se,  and  those  founded  in  positive  statutory 
prohibition,  which  are  termed  mala  prohibita.  The  law  extends  this 
peculiar  protection  to  negotiable  instruments,  because  it  would  seriously 
embarrass  mercantile  transactions  to  expose  the  trader  to  the  conse- 
quences of  having  a  bill  or  note  passed  to  him  impeached  for  some 
covert  defect.  There  is,  however,  one  exception  to  this  rule — that 
when  a  statute,  expressly  or  by  necessary  implication,  declares  the  m- 
strument  absolutely  void,  it  gathers  no  vitality  by  its  circulation  in  re£7 
spect  to  the  partierexecuting  it." 

In  the  case  of  Sondheim  v.  Gilbert,  117  Ind.  71,  18  N.  E.  687,  5  L. 
R.  A.  432,  reported  in  10  Am.  St.  Rep.,  at  page  23,  the  court  said :  "In 
order,  therefore,  to  uphold  a  judgment  which  invalidates  commercial 
paper  in  the  hands  of  innocent  holders,  such  as  plaintiffs  are  conceded 
to  be,  it  is  essential  that  a  statute  should  be  shown  governing  the  case, 
which  in  direct  terms  declares  that  transactions  such  as  those  here  in- 
volved are  unlawful,  and  that  notes  given  under  circumstances  exhib- 
ited by  the  facts  in  this  case  are  absolutely  void.  The  principle  may 
be  considered  as  well  established  that  when  a  statute  in  express  terms 
pronounces  contracts,  bills,  securities,  and  the  like,  resulting  from  or 
growing  out  of  wagering  or  gambling  transactions,  which  are  prohibited 
by  statute,  absolutely  void,  no  recovery  can  be  had  thereon;  and  the 
doctrine  that  transactions  which  a  statute  in  direct  terms  declares 
to  be  unlawful  cannot  acquire  validity  by  the  transfer  of  commercial 
paper  based  thereon,  which  is  also  under  direct  legislative  denunciation, 
is  fully  supported  by  authorities."    And  the  authorities  are  referred  to, 


REAL   DEFENSES  1G5 

and  the  court  continues :  "In_suQh  a^case,jii£^ote.  will  be  declared 
void  in  the  hands  of  an  innocent  holder," 

In  the~case  "of  Eohon's  Assignees  v.  Brown,  etc.,  101  Ky.  355,  41  S. 
W.  275,  38  L.  R.  A.  503,  72  Am.  St.  Rep.  420,  the  court  said :  "In  the 
case  of  Cochran  v.  German  Insurance  Bank,  9  Ky.  Law  Rep.  196,  the 
superior  court  held  that  'a  bill  or  note  based  upon  a  gambling  consider- 
ation is  absolutely  void,  and  the  drawer  or  maker  is  not  bound  to  even 
an  innocent  holder.'  And  in  the  case  of  Farmers'  &  Drovers'  Bank  of 
Louisville  v.  Unser,  13  Ky.  Law  Rep.  966,  the  court  says:  'The  whole 
current  of  authority  is  that  the  obligor  may  insist  upon  the  illegality  of 
the  contract  or  consideration,  notwithstanding  the  note  is  in  the  hands 
of  an  innocent  holder  for  value,  in  all  those  cases  in  which  he  can 
point  to  an  express  declaration  of  the  Legislature  that  such  an  illegality 
makes  the  contract  void.'  " 

For  these  reasons,  the  judgment  of  the  lower  court  is  affirmed. 


GREEN  et  al.  v.  GUNSTEN  et  al. 
(Supreme  Court  of  Wisconsin,  1913.     142  N.  W.  261.) 

Action  by  Sigmond  Green  and  another  against  Neil  Gunsten  and 
another.    From  a  judginent  of  dismissal,  plaintiffs  appeal.     Affirmed. 

Action  on  a  promissory  note,  dated  February  16,  1911,  for  $300,  pay- 
able six  months  after  date,  alleged  to  have  been  executed  and  delivered 
by  the  plaintiffs  to  the  defendants.  The  defendant  Gunsten  answered 
denying  that  he  signed  the  notej  and  averred  that  his.sjgpature  to  the 
same  was  5.. forgery.  He  also  set  up  the  defense  that,  if  he  did  sign 
the  note,  his  signature  thereto  was  procured  by  connivance  and  con- 
spiracy.. be.tween_the  plaintiffs  and  his  comaker  of  the  note,  O.  C. 
Loomis,  and  other  persons  acting  for  and  on  behalf  of  O.  C.  Loomis.  by 
reason  of  which  said  O.  C.  Loomis  and  others,  acting  for  and  on  behalf 
of  him,  encouraged  and  induced  the  defendant  Gunsten  to  drink  of  in- 
toxicating liquors  in  such  large  quantities  that  he  became  so  intoxicated 
that  he  was  deprived  of  his  reason  and  understanding,  and  that  if  he 
did  sign  his  name  to  said  note  it  was  done  while  in  such  condition  and 
was  not  done  of  his  own  free  will  and  consent ;  that  he  received  no 
consideration  whatever  for  said  signature ;  and  that  the  note  was  used 
by  his  comaker,  O.  C.  Loomis,  to  secure  his  obligations  to  the  plaintiffs, 
incurred  prior  to  the  making  of  the  note  and  accepted  by  plaintiff's  as 
security  for  such  obligations. 

The  jury  returned  a  verdict  finding:  (1)  That  the  defendant  Gunsten 
on  or  about  February  16,  1911,  did  sign  and  turn  over  to  the  defendant 
Loomis  the  promissory  note  sued  upon  in  this  action ;  and  (2)  that  said 
Gunsten  at  the  time  of  signing  said  noic  w  as  so  completely  intoxicated 
that  he  was  temporarilv  deprived  of  his  reason  and  understanding. 
Upon  such  verdict,  and  on  motion  of  defendant  Gunsten,  the  court  ren- 


16G  DEFENSES 

dered  judgment  in  his  favor  dismissing  the  action,  with  costs.     From 
such  judgment  the  plaintiffs  appealed. 

ViNjE,  J.  (after  stating  the  facts  as  above).  It  is  admitted  that  de- 
fendant Gunsten  was  an  accommodation  maker  of  the  note  if  it  was 
executed  under  such  circumstances  as  to  constitiite  him  a  maker  in  any 
sense.  Plaintiff's  claim  they  were  holders  in  due  course,  which  claim 
the  defendant  Gunsten  disputes.  The  trial  court,  in  the  disposition  of 
the  case,  evidently  treated  plaintiffs  as  such  holders,  and  we  shall  as- 
sume that  they  were.  That  raises  the  question  whether  or  not  total  or 
complete  drunkenness  on  the  part  of  the  accommodation  maker  of  a 
note  at  the  time  of  the  execution  and  delivery  thereof  is  a  defense  as 
against  a  holder  in  due  course. 

[1]  On  the  grounds  of  public  policy  and  the  necessities  of  commerce, 
some  courts  have  held  that  complete  drunkenness  on  the  part  of  the 
maker  of  a  note  at  the  time  of  its  execution  and  delivery  is  no  defense 
against  a  holder  in  due  course.  State  Bank  v.  McCoy,  69  Pa.  204,  8 
Am.  Rep.  246 ;  McSparran  v.  Neeley,  91  Pa.  18 ;  Smith  v.  Williamson, 
8  Utah,  219,  30  Pac.  753.  The  basis  for  the  rule  is  thus  stated  by 
Joyce,  Defenses  to  Com.  Paper,  §  69:  "The  reasons  underlying  this 
rule  are  that,  when  a  man  has  voluntarily  put  himself  in  such  a  condi- 
tion and  a  loss  must  fall  on  one  of  two  innocent  persons,  it  should  fall 
on  him  who  occasioned  it.  It  is  also  founded  on  principles  of  public 
policy  and  the  necessities  of  commerce.  The  circulation  and  currency 
of  negotiable  paper  should  not  be  unnecessarily  impeded,  and,  if  drunk- 
enness of  the  maker  were  a  defense  to  a  note  in  the  hands  of  an  in- 
dorsee, it  would  clog  and  embarrass  the  circulation  of  commercial  pa- 
per, and  no  man  could,  safely  take  it  without  ascertaining  the  condition 
of  the  maker  or  drawer  when  it  was  given,  though  there  be  nothing  un- 
usual or  suspicious  about  the  appearance  of  the  note."  That  this  rule 
is  founded,  at  least  in  part,  upon  substantial  grounds  of  public  policy 
cannot  be  denied.  Though  it  should  be  observed  that  drunkenness 
alone,  without  the  fraud  or  fault  of  another,  does  not  lead  to  the  signing 
of  notes.  In  every  case,  as  in  the  case  at  bar,  the  drunken  maker  has 
been  taken  advantage  of  by  a  designing  payee  or  third  party,  and  it  is 
not  strictly  correct  to  say  that  the  fault  is  that  of  the  drunken  maker 
alone.  Were  that  so,  there  would  be  more  reason  for  applying  the  rule 
that,  where  loss  must  fall  upon  one  of  two  innocent  persons,  it  should 
fall  on  him  who  occasioned  it.  Nor  can  a  holder  in  due  course  always 
rest  upon  the  assumption  that  the  maker  of  a  note  is  competent  to  ex- 
ecute it.  Insanity  of  the  maker  is  a  good  defense  against  a  bona  fide 
holder,  for  the  latter  takes  it  charged  with  constructive  notice  of  the 
legal  disability  of  the  maker.  1  Daniel,  Neg.  Inst.  §§  209,  210;  Joyce, 
Def.  to  Com.  Paper,  §  71. 

It  is_no  greater  hardship  to  charge  a  holder  in  due  course  with  con- 
structive notice  of"  the  incapacity  of  the  maker  resulting  from  com- 
plete drunkenness  than  from  insanity.  It  is  deemed  that  a  doctrine 
more  in  consonance  with  the  spirit  of  our  decisions  is  stated  by  Daniel 


REAL   DEFENSES 


1G7 


as  follows:  "If  the  drunkenness  were  so  complete^  as  to  suspend  all 
lational  thought^  the  better  opinion  Ts  thaLany  instrument  signed  by 
the  party  woufd  be  utterly  vdil,  even  in  the  hands  of  a  bona  fide  holder 
without  noti.r,  fm-,  although  it  may  have  been  the  party's  own  fault 
that"  such  an  abenaiiun  of  mind  was  produced,  when  produced,  it  sus- 
pended for  the  time  being  his  capacity  to  consent,  which  is  the  first  es- 
sential of  a  contract."  1  Daniel,  Neg.  Inst.  (5th  Ed.)  §  214;  1  Parsons, 
Notes  &  Bills,  151 ;  Gore  v.  Gibson,  13  M.  &  W.  623.  But  the  drunk- 
enness must  be  so  complete  as  to  deprive  the  maker  of  the  use  of  his 
faculties.  Miller  v.  Finlcy,  26  ^Mich.  249,  12  Am.  Rep.  306;  Caulkins 
V.  Fry,  35  Conn.  170.  Intoxication  merely  to  the  extent  that  he  cannot 
give  the  attention  to  it  that  a  reasonably  prudent  man  would  be  able 
to  give  is  not  sufficient.  Wright  v.  Waller,  127  Ala.  557,  29  South.  57, 
54  L.  R.  A.  440.  See  authorities  cited  in  note  as  to  degree  of  intoxica- 
tion that  will  avoid  a  contract.  The  rule  that  complete  drunkenness 
is  available  as  a  defense  in  a  suit  upon  a  contract  has  been  clearly  rec- 
ognized by  our  own  court.  Bursinger  v.  Bank  of  Watertown,  67  Wis. 
75,  30  N.  W.  290,  58  Am.  Rep.  848;  Burnham  v.  Burnham,  119  Wis. 
509,  97  N.  W.  176,  100  Am.  St.  Rep.  895. 

In  Bursinger  v.  Bank  of  Watertown,  67  Wis.  75,  30  N.  W.  290,  58 
Am.  Rep.  848,  the  contract  under  consideration  was  the  assignment  of 
an  insurance  policy,  and  the  court  said :  "The  evidence  tended  to  show 
that,  by  reason  of  his  intoxication,  he  was  incapable  of  comprehending 
what  he  was  doing  at  the  time  he  executed  said  assignments,  and  was 
therefore  within  the  well-established  rule  of  law  that  a  drunkard,  when 
in  a  complete  state  of  intoxication,  so  as  not  to  know  what  he  is  doing, 
has  no  capacity  to  contract.  1  Benj.  on  Sales  (Am.  Ed.  Corbin)  42; 
Gore  v.  Gibson,  13  Mecs.  &  W.  623;  Cooke  v.  Clayworth,  18  Ves.  Jr. 
12;  Story  on  Cont.  (4th  Ed.)  §§  44,  45,  and  cases  cited  in  notes;  Bel- 
cher v.  Belcher,  10  Yerg.  [Tenn.]  121 ;  French's  Heirs  v.  French,  8 
Ohio,  214  [31  Am.  Dec.  441]  ;  Jenners  v.  Howard,  6  Blackf.  [Ind.] 
240;  Mitchell  v.  Kingman,  5  Pick.  [Mass.]  431;  Webster  v.  Wood- 
ford, 3  Day  [Conn.]  90;  Seaver  v.  Phelps,  11  Pick.  [Mass.]  304  [22 
Am.  Dec.  o72]  ;   Rice  v.  Peet,  15  Johns.  [N.  Y.]  503." 

In  Burnham  v.  Burnham,  119  Wis.  509,  97  N.  W.  176,  100  Am.  St. 
Rep.  895,  the  rule  is  stated  thus :  "A  person  addicted  to  the  habitual 
and  excessive  use  of  intoxicating  liquor  is  not  incompetent  to  enter  into 
contract.'?  and  convey  property,  unless  it  appears  that  actual  intoxication 
dethroned  his  reason,  or  that  his  understanding  was  so  impaired  as  to 
render  him  mentally  unsound  when  the  act  was  performed.  Johnson  v. 
Harmon,"  94  U.  S.  371  [24  L.  Ed.  271]  ;  Van  Wyck  v.  Brasher,  81  N. 
Y.  260;  Reinskopf  v.  Rogge,  37  Ind.  207." 

The  reason  for  the  rule  is  that  there  can  be  no  valid  contract  where 
there  is  no  mind  capable  of  contracting.  That  drunkenness  may  be  so 
complete  as  to  render  a  person  utterly  incapable  of  comprehending  the 
nature  of  his  acts  or  that  he  is  acting  at  all  is  a  fact  as  sad  as  it  is  true. 
"Drunkenness,"  says  Tiedeman,  "is,  in  legal  contemplation,  an  aber- 


1G8  DEFENSES 

ration  ofjnind  similar  in  its  effect  upon  the  reasoning  faculties  a^tem- 
porary  insanity.  Hence  we  find  that  the  legal  effect  of  contracts  made 
by  one  in  a  state  of  intoxication  is  affected  in  the  same  way  by  the 
intoxication  of  the  contractor  as  they  are  by  his  insanity."  Tied.  Com. 
Pap.  §  57. 

[2]  If  complete  drunkenness,  by  which  is  meant  drunkenness  to 
such  an  extent  as  to  wholly  destroy  for  the  time  being  the  rational 
faculties  of  the  mind,  renders  a  note  absolutely  void  as  between  maker 
and  payee,  then,  under  the  provisions  of  our  Negotiable  Instrument 
Law  (St.  1911),  it  is  void  in  the  hands  of  a  holder  in  due  course. 

Section  1676 — 25  provides :  "The  title  of  a  person  who  negotiates 
an  instrument  is  defective  within  the  meaning  of  this  act  when  he 
vibtains  the  instrument,  or  any  signature  thereto,  by  fraud,  duress,  or 
force  or  fear,  or  other  unlawful  means,  or  for  an  illegal  consideration, 
or  when  he  negotiates  it  in  breach  of  faith,  or  under  such  circumstances 
as  amount  to  a  fraud  and  the  title  of  such  person  is  absolutely  void 
when  such  instrument  or  signature  was  so  procured  from  a  person  who 
did  not  know  the  nature  of  the  instrument  and  could  not  have  obtained 
such  knowledge  by  the  use  of  ordinary  care." 

And  section  1676 — 27  reads :  "A  holder  in  due  course  holds  the  in- 
strument free  from  any  defect  of  title  of  prior  parties,  and  free  from 
defenses  available  to  prior  parties  among  themselves,  and  may  enforce 
payment  of  the  instrument  for  the  full  amount  thereof  against  all  par- 
ties liable  thereon  except  as  provided  in  sections  1944  and  1945  of  these 
statutes,  relating  to  insurance  premiums,  and  also  in  cases  where  the 
title  of  the  person  negotiating  such  instrument  is  void  under  the  provi- 
sion of  section  1676 — 25  of  this  act." 

By  the  provisions  of  this  law  it  will  be  seen  that  a  holder  in  due 
course  takes  no  title  where  the  note  was  absolutely  void  in  its  inception, 
as  where  there  was  no  maker  capable  of  executing  the  instrument. 
This  result  follows  for  the  obvious  reason  that  no  life,  or  validity,  can 
be  given  by  transfer  to  that  which  is  absolutely  void.  It  is  the  same  as 
if  it  had  no  existence  at  all.  And  it  is  but  the  expression  of  the  rule 
embodied  in  the  decisions  of  this  court.  Aukland  v.  Arnold,  131  Wis. 
64,  and  cases  cited  on  page  67,  111  N.  W.  212. 

[3]  Plaintiffs  argue  that  the  rule  of  ordinary  care,  as  applied  in  neg- 
ligence cases,  obtains  under  the  provisions  of  section  1676 — 27  of  the 
Negotiable  Instruments  Law.  It  is  not  necessary  to  decide  the  ques- 
tion in  this  case.  Thejury  found  that  at  the  time  Gunsten  signed  the 
note  he  was  sq  .CQnjpletely  intoxicated  that  he  was  temporarily  deprived 
of  liis  rcusoii  and  understanding.  Manifestly,  while  in  such  condition, 
the  rule  of  ordinary  care  d'oes  riot  apply.  He  was  incapable  of  exer- 
cising any  care  whatever.  Nor  can  it  be  held  that  he  should  have  exer- 
cised care  not  to  get  drunk,  for,  as  before  observed,  the  signing  of 
notes  is  not  the  usual  or  probable  result  of  drunkenness.  It  is  other- 
wise as  to  a  personal  injury.  A  man  may  well  reasonably  anticipate 
that  if  he  gets  drunk  and  becomes  unable  to  care  for  himself  he  may, 


REAL  DEFENSES  109 

without  the  fault  of  another,  sustain  bodily  harm,  or  even  death  itself. 
But  a  drunken  man,  if  left  alone  and  not  taken  advantage  of  by  others, 
is  not,  as  a  mere  result  of  the  drunkenness,  likely  to  sign  notes  or  exe- 
cute any  other  contracts.  The  law  does  not  favor  drunkenness;  nor 
does  it  place  in  the  hands  of  a  drunkard  any  shield  against  his  con- 
scious  or  ratioUc^TacXg.  It  simply'says  that  when,  through  drunkcnnc.--. 
or  any  other  means,  a  man  is  temporarily  or  permanently  wholly  in- 
capacitated from  exercising  his  rational  faculties,  then  he  shall  not  be 
liable  upon  what  purports  to  be  a  contract  entered  into  while  in  such 
state,  because  a  mind  bereft  of  reason  or  conscious  rational  action  is 
incapable  of  consenting  or  contracting.  In  speaking  of  the  early  Eng- 
lish doctrine  holding  that  a  man  should  not  be  allowed  to  stultify  him- 
self by  alleging  his  own  lunacy  or  imbecility,  Daniel  says :  "Such  doc- 
trine sounds  more  like  the  gibberish  of  a  lunatic  than  like  the  decree  of 
a  humane  and  enlightened  lawyer.  The  maxim  of  the  civil  law,  'Furi- 
osus  nullum  negotium  agere  potest,  qui  non  intelligit  quid  agit,'  ex- 
presses the  sense  of  modern  jurisprudence  on  the  subject."  1  Daniel, 
Neg.  Inst.  §  209.  The  same  maxim  applies  equally  well  to  a  person  in  a 
state  of  complete  intoxication  as  to  an  act  or  result  that  cannot  be  said 
to  be  reasonably  anticipated  from  mere  drunkenness. 
Judgment  affirmed. 


DRUM  v.  DRUM. 
(Supreme  Judicial  Court  of  Massachusetts,  Barnstable,  1SS2.     13.3  Mass.  56G.) 

Contract  upon  a  promissory  note  for  $100,  dated  October  19,  1869, 
payable  on  demand  to  the  plaintiff,  or  order,  signed  by  the  defendant, 
and  witnessed.  Writ  dated  September  28,  1878.  Trial  in  the  superior 
court,  before  Brigham,  C.  J.,  who  allowed  a  bill  of  exceptions,  in  sub- 
stance as  follows : 

The  plaintiff  offered  the  note  in  evidence ;  and  the  signatures  of  the 
defendant  and  of  the  attesting  witness  were  proved.  It  appeared  that 
the  note,  after  its  delivery  to  the  plaintiff,  who  could  neither  read 
nor  write,  had  been  changed  in  the  following  respects :  The  figures 
"$100"  had  been  made  to  read  "$136,"  or  "$156";  the  word  "dollars" 
had  been  made  to  read  "fifty,"  or  "thirty,"  the  word  "six"  being  inter- 
polated thereafter ;  and  the  word  "on"  changed  to  "dollars,"  and  an- 
other word  "on"  interpolated  before  the  word  "demand." 

The  plaintiff  testified  that  he  knew  nothing  about  the  erasures  and 
changes  above  described,  and  neither  made  them  himself,  nor  directly 
or  indirectly  authorized  the  same  to  be  made ;  and  the  agent  of  tiie 
plaintiff',  in  whose  possession  the  note  was  left  for  a  time,  testified  the 
same  as  the  plaintiff",  as  to  her  knowledge  of,  and  relation  to,  said 
erasures  and  changes. 

The  defendant  objected  that  the  plaintiff  was  not  entitled  to  recover 
upon  the  note,  unless  he  first  explained  and  accounted  for  said  changes 


170  DEFENSES 

and  erasures ;  and  that  there  was  a  variance  between  the  plahitiff's  al- 
legations and  the  proofs. 

The  plaintiff  asked  the  judge  to  instruct  the  jury  as  follows :  "If 
the  jury  believe  that  said  $100  note  was  altered  without  the  knowledge 
or  consent  of  the  plaintiff,  and  without  his  agency,  directly  or  indi- 
rectly, it  is  not,  in  law,  an  alteration,  but  a  mutilation  or  spoliation ; 
and  the  note  would  be  good  for,  and  according  to,  its  original  tenor." 

The  judge  declined  to  give  this  instruction;  but  instructed  the  jury 
as  follows:  "The  note  of  $100,  appearing  to  be  materially  altered,  is 
void,  unless  the  plaintiff  proves  that  it  was  altered  by  consent  of  the 
defendant,  or  proves  the  circumstances  of  its  alteration  as  well  as  that 
he  did  not  make  or  procure  it.  The  alteration  would  not  be  sufficiently 
explained  by  proof  that  the  plaintiff'  did  not  make,  direct  or  procure  it." 

The  jury  returned  a  verdict  for  the  defendant;  and  the  plaintiff  al- 
leged exceptions. 

CoLBURN,  J.  The  note  declared  on  in  this  case  was  for  $100,  signed 
by  the  defendant,  and  payable  to  the  plaintiff,  or  order.  Upon  the 
production  of  the  note,  it  appeared  to  have  been  changed  from  a  note 
for  $100  to  a  note  for  $136,  or  $156,  in  the  manner  stated  in  the  ex- 
ceptions. 

It  was  proved  at  the  trial  that  this  note  was  originally  a  valid  note 
for  $100,  and  it  was  not  pretended  that  it  had  ever  been  changed  with 
the  knowledge  or  consent  of  the  defendant.  The  note  was  not  in- 
dorsed, and,  so  far  as  appears,  had  always  been  owned  by  the  plaintiff, 
and  in  his  possession  or  in  that  of  his  agent. 

These  changes,  under  the  circumstances,  rendered  the  note  prima 
facie  void,  and  the  burden  was  upon  the  plaintiff'  to  explain  them.  If 
the  changes  had  been  made  by  the  plaintiff,  or  by  his  authority  or 
consent,  directly  or  indirectly,  the  note  was  absolutely  void.  Adams 
V.  Frye,  3  Mete.  103 ;  Fay  v.  Smith,  1  Allen,  477,  79  Am.  Dec.  752 ; 
1  Greenl.  Ev.  §  564.  But  if  the  changes  had  been  made  by  a  stranger, 
without  the  knowledge  or  consent  of  the  plaintiff,  directly  or  indirectly, 
the  note  remained  a  valid  note,  according  to  its  original  tenor.  Adams 
V.  Frye,  ubi  supra;   1  Greenl.  Ev.  §  566. 

If  the  plaintiff  proved  that  the  note  had  never  rightfully,  or  to  his 
knowledge,  been  in  the  possession  of  any  one  but  himself  and  his  agent, 
and  that  the  alterations  were  not  made  by  him  or  his  agent,  or  with 
the  knowledge  or  consent,  directly  or  indirectly,  of  either  of  them,  he 
was  entitled  to  recover  on  the  note  as  originally  written,  though  he 
might  not  be  able  to  prove  the  circumstances  of  its  alteration ;  and 
there  was  evidence  tending  to  show  that  these  were  the  facts  in  this 
case.  " 

We  are  of  opinion  that  the  judge  erred  in  instructing  the  jury,  as  he 
apparently  did,  in  effect,  that  proof  of  the  state  of  facts  above  supposed 
would  not  entitle  the  plaintiff  to  recover.  Of  course,  we  express  no 
opinion  as  to  the  credibility  of  the  evidence  at  the  trial,  or  the  proba- 


REAL   DEFENSES 


171 


Lility  that  such  changes  as  were  made  in  the  note  would  have  been  made 
by  a  stranger.    These  are  considerations  for  the  jury. 

If,  as  we  infer  from  the  exceptions,  the  tenor  of  the  note  as  orig- 
inally written  was  apparent  upon  inspection  of  the  note,  it  was  suffi- 
cient to  declare  upon  it  in  the  usual  way ;  and,  upon  showing  that  the 
changes  in  the  note  were  mere  spoliations,  there  would  be  no  variance 
between  the  allegation  and  proof. 

Exceptions  sustained. 


NATIONAL  EXCII.  BANK  OF  ALBANY  v.  LESTER. 

{Court  of  Appeals  of  New  York,  3909.     194  N.  Y.  401,  87  N.  E.  779,  21  L.  R.  A. 

(N.  S.)  -iO-2,  IG  Ann.  Cas.  770.) 

Appeal  from  the  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Third  Judicial  Department,  entered  May  16,  1907,  aftirm- 
ing  a  judgment  in  favor  of  plaintiff  entered  upon  a  verdict  and  an  order 
denying  a  motion  for  a  new  trial. 

The  defendant  was  sued  as  the  accommodation  indorser  upon  a  note 
for  $375  made  by  one  Frank  L.  Fanchcr  and  acquired  by  the  plaintiff 
bank  before  maturity  in  the  regular  course  of  its  business.  The  de- 
fense was  that  the  note  as  originally  made  and  indorsed  was  for  $75 
only;  that  the  maker  thereafter,  without  the  knowledge  or  consent  of 
the  indorser^  altered  the  note  by  inserting  in  the  body  thereof  the  words 
"three  hundred"  immediately  in  front  of  the  words  "seventy-five"  and 
the  figure  "3"  immediately  in  front  of  the  figures  "75,"  thereby  making 
the  instrument  apparently  a  note  for  $375  instead  of  $75 ;  and  that  the 
maker  thereaftec  caused  the  note  as  thus  altered  to  be  discounted  by 
the  plaintiff  bank.  The  answer  prayed  judgment  that  the  complaint  be 
dismissed  except  as  to  the  amount  of  the  note  before  alteration,  to- 
gether with  interest  and  protest  fees,  to  wit,  $78.66.  The  defendant 
also  served  an  oft'er  to  allow  the  plaintiff  to  take  judgment  for  that 
amount. 

Upon  the  trial  the  court  charged  the  jury  that,  if  the  note  indorsed 
by  the  defendant  was  in  fact  a  note  for  $375  on  its  face,  the  plaintiff 
was  entitled  to  recover  that  amount  and  interest.  The  trial  judge  fur- 
ther charged  the  jury  that  if  they  found  that  there  were  spaces  upon 
the  note  "so  carelessly  and  negligently  left  by  this  indorser,  Mr.  Lester, 
that  a  person  having  custody  of  the  note  might  run  in  a  figure  3  and 
the  words  'three  hundred'  so  as  not  to  occasion  in  the  mind  of  the  in- 
dorser [evidently  meaning  indorsee]  any  inquiry  into  its  validity," 
they  might  find  that  the  indorser  conducted  himself  carelessly  and  neg- 
Ugcntly  in  the  premises,  and  thus  invited  the  liability  which  the  face 
of  the  note  called  for  when  presented  to  the  bank. 

The  defendant  duly  excepted  to  that  part  of  the  charge  to  the  effect 
that,  if  the  defendant  was  negligent  in  leaving  blank  spaces,  the  jury 
must  find  a  verdict  for  the  plaintiff  for  the  full  amount  of  the  note  as 


172  DEFENSES 

it  stood.    The  court  then  reiterated  the  proposition,  saying  that,  "if__the_ 
jtRy  TTndnEliat  the  defendjin^  was  careless  and  negligent^iii  kaving^^ 
^[actm  space^Txil^liejtvords  and  Sgures,  such  carelesiness  and  negli- 
geQce  on  his  part  woulB  still  make  him  liable  for  the  note;"    and  to 
this  the  defendant  also  excepted. 

The  jury  found  for  the  plaintiff  in  the  sum  of  $375,  with  interest. 
The  judgincnt  entered  upon  the  verdict  has  been  unanimously  affirmed 
by  the  Appellate  Division. 

WiLLARD  BarTlETT,  J.  As  this  case  went  to  the  jury,  they  might 
well  have  found  that  the  note  in  suit  was  a  note  for  only  $75  when 
originally  prepared  by  the  maker  and  indorsed  at  his  instance  by  the 
defendant,  and  that  it  had  subsequently  been  altered  to  a  note  for  $375 
when  discounted  by  the  plaintiff  bank.  They  were  instructed  in  sub- 
stance, however,  that  the  indorser  was  liable  for  the  amount  of  the 
note  as  raised  by  the  alteration,  if  he  had  been  careless  and  negligent 
in  placing  his  name  upon  the  instrument  while  there  were  spaces  there- 
on which  permitted  the  insertion  of  the  words  and  figure  whereby  it 
was  transmuted  from  a  note  for  $75  into  a  note  for  $375.  Conceding 
that  the  contract  which  he  actually  signed  bound  him  only  to  pay  the 
smaller  amount,  the  jury  were  permitted  to  find  that  in  consequence 
of  his  negligence  in  the  respect  indicated  it  had  become  a  contract 
which  bound  him  to  pay  the  larger  amount  to  a  subsequent  innocent 
holder  of  the  paper. 

In  support  of  the  correctness  of  this  ruling,  the  learned  counsel  for 
the  respondent  asserts  the  doctrine  that  "a  party  to  a  note  who  puts  his 
name  to  it  in  any  capacity  of  liability,  when  it  contains  blanks  uncan- 
celed facilitating  an  alteration  raising  the  amount,  .is  liable  for  tjie 
face  of  the  note  as  raised  to  an  innocent  holder  for  value" ;  and  he  de- 
clares that  thiTHoctrine  has  been  approved 'and  apparently  adopted  in 
Alabama,  California,  Colorado,  Illinois,  Kansas,  Kentucky,  Louisiana, 
Michigan,  Missouri,  Nebraska,  and  Pennsylvania.  In  considering  his 
proposition,  it  is  important  to  bear  in  mind  a  radical  distinction  which 
exists  between  two  classes  of  notes  to  which  the  adjudicated  cases  re- 
late: (1)  Those  notes-in^vhich  _obyigi4|_Manks  are  left  at  the  time^ 
when  they  are'made~oFln7Iorsed,  of  such  a  character  as  mamTestly  jo 
indicate  llirit  the  iii^truun  ni-  .-irclncom.plete  until  sucTi' bFanks  shall  be. 
fiUed  up;  and  (2)  those  notes  which  are  apparently  complete,  and 
which  can  be.  regarded  as  containing  blanks  only  becatisejhe  written 
malter_rdQes~not"so  fully  occupy  the  entire  paper  as  to  preclude  the 
insertion  of  additional  words  or  figures  or  both.  It  is  a  note  of  the 
latter  class  that  we  have  to  deal  with  here.  One_who  signs  or  indorses^ 
a  note  of  the  first  class  has  been  held  liable  to  bona  fi(de  hoTders  thereof , 
in  "some  oFlhe  cases  cited  by  the  respondent,  according  to  the  terms 
of  the  note  after  the  blanks  have  been  filled,  on  the  doctrine  of  im- 
plied authority,  while  in  other  cases,  relating  to  notes  of  the  second 
class,  the  liability  of  the  maker  or  indorser  for  the  amount_of  .the_note 


REAL   DEFENSES  173 

a§^  increased  by  filling  up  the  unoccupied  spaces  therein  is  placed  upon 
the  doctrine  of  negligence^of  estoppel  by  negligence. 

The  cases  cited  by  respondent  Tn  wHicli  parties  to  commercial  paper 
executed  by  them  while  obvious  blanks  remained  unfilled  thereon  have 
been  held  liable  upon  the  instrument  as  completed  by  filling  out  such 
blanks,  on  the  ground  of  implied  authority,  require  no  further  consid- 
eration here,  as  there  is  no  suggestion  that  there  was  any  blank  of 
this  character  upon  the  note  in  suit.  These  cases  ar,e  Winter  &  Loeb  v. 
Pool,  104  Ala.  580,  16  South.  543 ;  Statton  v.  Stone,  15  Colo.  App.  237, 
61  Pac.  481 ;  Cason  v.  Grant  County  Deposit  Bank,  97  Ky.  487,  31  S 
W.  40,  53  Am.  St.  Rep.  418;  Weidman  v.  Symes,  120  Mich.  657,  7^ 
N.  W.  894,  77  Am.  St.  Rep.  603.  There  were  obvious  blanks  also  in 
the  notes  under  consideration  in  Visher  v.  Webster,  8  Cal.  109,  and 
Lowden  v.  S.  C.  Nat.  Bank,  38  Kan.  533,  16  Pac.  748,  and  the  decision 
in  each  of  these  cases  appears  to  have  proceeded  upon  the  doctrine 
of  implied  authority  rather  than  negligence. 

It  must  frankly  be  conceded,  however,  that  the  respondent  finds  sup- 
port for  the  doctrine  which  it  asserts  in  the  case  at  bar  in  the  decisions 
of  Pennsylvania,  Illinois,  and  Missouri,  so  far  as  the  maker  of  com- 
mercial paper  is  concerned,  and  in  those  of  Kentucky  and  Louisiana,  in 
respect  to  the  liability  of  a  party  who  has  indorsed  or  become  surety 
upon  a  note  in  which  there  were  spaces  (not  obvious  blanks)  that  per- 
mitted fraudulent  insertions  enlarging  the  amount.  Garrard  v.  Had- 
dan,  67  Pa.  82,  5  Am.  Rep.  412;  Yocum  v.  Smith,  63  111.  321,  14  Am. 
Rep.  120;  Scotland  County  Nat.  Bank  v.  O'Connel,  23  Mo.  App.  165  ; 
Hackett  v.  First  Nat.  Bank  of  Louisville,  114  Ky.  193,  70  S.  W.  664; 
Isnard  v.  Torres  &  Marquez,  10  La.  Ann.  103. 

In  Garrard  v.  Haddan,  supra,  a  space  was  left  between  the  words 
"one  hundred"  and  the  word  "dollars"  in  which  "fifty"  had  been  in- 
serted after  the  maker  had  signed  and  delivered  it ;  and  the  court  held 
the  maker  answerable  to  a  bona  fide  holder  for  the  full  face  of  the 
note  as  altered  on  the  ground  of  the  negligence  of  the  maker  in  leaving 
the  space  in  the  note  which  was  thus  filled  up  after  execution.  "We 
think  this  rule  is  necessary,"  said  Chief  Justice  Thompson,  "to  facili- 
tate the  circulation  of  commercial  paper,  and  at  the  same  time  increase 
the  care  of  drawers  and  acceptors  of  such  paper  and  also  of  bankers, 
brokers,  and  others  in  taking  it."  It  is  a  little  difficult  to  see  how  the 
rule  tends  to  make  bona  fide  purchasers  more  careful,  as  this  last  obser- 
vation suggests. 

The  case  of  Yocum  v.  Smith,  supra,  held  the  maker  liable  upon  a 
note  which  had  been  raised  after  execution  from  $100  to  $120;  the 
words  "and  twenty"  having  been  inserted  in  a  space  left  between  the 
word  "hundred"  and  the  word  "dollars."  The  court  said  that  the 
maker  had  acted  with  unpardonable  negligence  in  signing  the  note  and 
leaving  a  blank  which  could  so  easily  be  filled ;  that  he  had  thus  placed 
it  in  the  power  of  another  to  do  an  injury ;  and  that  he  must,  therefore, 
suffer  the  resulting  loss.    This  decision  undoubtedly  sustains  the  posi- 


174  DEFENSES 

tion  of  the  respondent,  although  there  was  another  element  of  negli- 
gence in  that  case  which  is  not  present  here.  It  appeared  that  the 
maker  there  was  informed  by  letter  by  the  purchaser,  very  soon  after 
the  date  of  the  note,  that  he  had  bought  it  and  of  its  date  and  amount; 
yet  he  made  no  objection  as  to  the  amount  until  nearly  a  year  later. 

In  Scotland  County  Nat.  Bank  v.  O'Connel,  supra,  the  defendants  ex- 
ecuted and  delivered  a  note  for  $100  to  one  Smith,  the  body  of  which 
was  in  his  handwriting,  in  a  condition  which  enabled  him  to  add  the 
words  "thirty-five"  after  "one  hundred"  in  the  written  part  and  put  the 
figures  "$135"  at  the  head  of  the  note  in  the  space  where  the  amount 
is  usually  indicated  by  figures.  The  St.  Louis  Court  of  Appeals  held 
that  the  defendants  were  liable  for  $135  because  they  had  delivered 
the  note  to  Smith,  who  was  their  co-maker,  "in  such  a  condition  as  to 
enable  him  to  fill  blank  spaces  without  in  any  manner  changing  the 
appearance  of  the  note  as  a  genuine  instrument." 

The  cases  thus  far  discussed  were  all  of  them  actions  against  the 
makers  of  the  raised  paper.  The  same  rule,  however,  was  applied 
against  an  indorser  in  Isnard  v.  Torres  &  Marquez,  supra,  by  the 
Supreme  Court  of  Louisiana  under  the  following  circumstances :  Mar- 
quez indorsed  a  note  for  $150  for  the  accommodation  of  Torres.  The 
amount  was  raised  to  $1,150,  and  purchased  by  the  plaintiff  in  good 
faith  as  a  note  for  that  sum.  The  report  states  that  there  was  testi- 
mony of  experienced  persons  to  the  effect  that,  if  at  the  time  of  the 
indorsement  the  word  "onze"  (for  eleven,  the  note  being  in  French) 
"and  the  additional  figure  before  150  were  not  there,  "the  note  would 
have  exhibited  blanks  which  at  least  with  regard  to  the  written  part 
were  unusual  and  calculated  to  attract  attention,  and  would  have  ren- 
dered the  note  unsalable  in  the  market."  In  this  opinion,  upon  inspec- 
tion of  the  note,  the  court  expressed  its  full  concurrence.  The  indorser 
was  held  liable  for  the  amount  of  the  note  as  raised  on  the  ground  that 
he  had  not  exercised  proper  caution.  To  the  same  effect  is  Hackett  v. 
First  Nat.  Bank  of  Louisville,  supra,  where  it  was  held  that  a  surety 
wdio  had  signed  a  note  in  which  were  written  the  words  "five  hundred" 
with  spaces  before  and  after  them,  which  the  maker  had  filled  up  by 
writing  "twenty"  before  and  "fifty"  after  them,  thereby  making  a  note 
for  $2,550,  was  liable  thereon  to  a  purchaser  in  good  faith.  In  this 
case  the  attention  of  the  Kentucky  Court  of  Appeals  was  called  to  the 
fact  that  the  great  weight  of  authority  was  the  other  way,  but,  in  view 
of  the  fact  that  the  rule  had  been  so  established  in  Kentucky  for  a 
quarter  of  a  century,  the  court  determined  to  adhere  to  it,  in  observ- 
ance of  the  principle  of  stare  decisis.  - 

This  court  is  not  thus  constrained.  The  question  involved  in  the 
present  appeal  has  not  been  authoritatively  decided  in  this  state,  and 
we  are  at  liberty  to  adopt  that  view  of  the  law  which  seems  to  us  most 
consonant  with  sound  reason  and  best  supported  by  well-considered 
adjudications  in  other  jurisdictions. 


EEAL   DEFENSES 


^  -J 


The  outcome  of  these  adjudications  is  accurately  set  forth,  as  it 
seems  to  me,  by  Mr.  Randolph  in  his  treatise  on  the  Law  of  Commercial 
Paper,  as  follows:  "Where  negotiable  paper  has  been  executed  with 
the  amount  blank,  it  is  no  defense  against  a  bona  fide  holder  for  value 
for  the  maker  to  show  that  his  authority  has  been  exceeded  in  filling 
such  blank  and  a  greater  amount  written  than  was  intended.  This  was 
also  once  held  to  be  the  rule  where  no  blank  had  been  actually  left,  but 
the  maker  had  negligently  left  a  space  either  before  or  after  the  written 
amount  which  made  it  easier  for  a  holder  fraudulently  to  enlarge  the 
sum  first  written.  It  has  now,  however,  become  in  America  an  estab- 
lished rule  that,  if  the  instrument  was  complete  without  blanks  at  the 
time  of  its  delivery,  the  fraudulent  increase  of  the  amount  by  taking 
advantage  of  a  space  left  without  such  intention  *  *  *  will  con- 
stitute a  material  alteration,  and  operate  to  discharge  the  maker."  1 
Randolph  on  Commercial  Paper,  §  187. 

The  rule  thus  stated  is  sustained  by  the  decisions  of  the  courts  of 
last  resort  in  Massachusetts,  Michigan,  New  Hampshire,  Iowa,  Mary- 
land, Mississippi,  Arkansas,  and  South  Dakota.  In  my  judgment  it 
rests  on  a  sounder  basis  than  the  opposite  doctrine,  and  accords  better 
with  such  adjudications  of  this  court  as  bear  more  or  less  directly  on 
the  question  involved. 

The  leading  case  sustaining  this  view  is  Greenfield  Savings  Bank  v. 
Stowell,  123  Mass.  196,  25  Am.  Rep.  67,  in  which  the  opinion  was 
written  by  Chief  Justice  Gray,  afterward  an  Associate  Justice  of  the 
Supreme  Court  of  the  United  States.     The  discussion  is  careful  and 
exhaustive,  reviewing  all  the  important  cases  in  England  and  America 
bearing  upon  the  subject  which  had  been  decided  up  to  that  time  (1877), 
including  that  of  the  Supreme  Court  of  Pennsylvania  in  Garrard  v. 
Haddan,  supra,  which  was  the  principal  authority  the  other  way.     I 
shall  not  undertake  to  review  the  same  authorities  here  or  paraphrase 
the  opinion  of  Chief  Justice  Gray  which  deals  with  them  in  such  a 
manner  as  fully  to  justify  his  rejection  of  the  doctrine  that  the  makers 
of  a  promissory  note  apparently  complete  when  they  sign  it  are  liable 
for  an  amount  to  which  it  may  subsequently  be  raised,  without  their 
knowledge  or  consent,  on  the  ground  that  they  were  negligent  in  per- 
mitting spaces  to  remain  thereon  in  which  the  figures  and  words  which 
aft'ected  the  increase  could  be  inserted.     In  support  of  his  conclusion, 
however,  he  quotes  some  passages  from  the  opinion  of  Christancy,  J., 
in  Holmes  v.  Trumper,  22  Mich.  427,  7  Am.  Rep.  661,  which  will  bear 
repetition  as  suggestive  of  some  of  the  reasons  why  the  forgery  of  a 
promissory  note  should  not  be  held  to  create  a  contract,  which  the  party 
sought  to  be  charged  never  consciously  made  himself  or  authorized 
anybody  else  to  make  in  his  behalf.    Speaking  of  the  alleged  negligence 
in  leaving  spaces  on  the  note,  Mr.  Justice  Christancy  said :  "The  negli- 
gence, if  such  it  can  be  called,  is  of  the  same  kind  as  might  be  claimed 
if  any  man  in  signing  a  contract  were  to  place  his  name  far  enough  be- 
low the  instrument  to  permit  another  line  to  be  written  above  his  name 


176  DEFENSES 

in  apparent  harmony  with  the  rest  of  the  instrument.  *  *  *  When- 
ever a  party  in  good  faith  signs  a  complete  promissory  note,  however 
awkwardly  drawn,  he  should,  we  think,  be  equally  protected  from  its 
alteration  by  forgery  in  whatever  mode  it  may  be  accomplished ;  and, 
unless  perhaps  when  it  has  been  committed  by  some  one  in  whom  he  has 
authorized  others  to  place  confidence  as  acting  for  him,  he  has  quite  as 
good  a  right  to  rest  upon  the  presumption  that  it  will  not  be  criminally 
altered  as  any  person  has  to  take  the  paper  on  the  presumption  that  it 
has  not  been ;  and  the  parties  taking  such  paper  must  be  considered  as 
taking  it  upon  their  own  risk,  so  far  as  the  question  of  forgery  is  con- 
cerned, and  as  trusting  to  the  character  and  credit  of  those  from  whom 
they  receive  it  and  of  the  intermediate  holders." 

While  a  general  reference  to  the  cases  cited  and  reviewed  by  Chief 
Justice  Gray  in  Greenfield  Savings  Bank  v.  Stowell,  supra,  will  suffice, 
there  are  some  later  decisions  to  which  attention  may  be  called.  In 
Knoxville  Nat.  Bank  v.  Clark,  51  Iowa,  264,  1  N.  W.  491,  33  Am. 
Rep.  129,  will  be  found  a  strong  and  well-reasoned  opinion  against 
holding  a  party  to  a  note  which  has  been  fraudulently  raised,  after  it 
left  his  hands,  liable  for  negligence,  because  when  he  executed  the  in- 
strument there  were  spaces  left  thereon  (not  being  obvious  blanks  de- 
signed to  be  filled)  which  would  permit  of  forgery.  The  trial  court 
had  rendered  judgment  against  the  maker  for  the  amount  of  the  note 
as  raised  from  $10  to  $110  on  a  finding  of  negligence  in  leaving  a  space 
before  the  word  "ten"  and  the  figures  "10."  "On  this  ground,"  said  the 
Supreme  Court  of  Iowa,  "the  court  proceeded  and  the  decision  is  based 
on  the  reasoning  of  the  civil  lawyers.  But  could  it  be  anticipated  that 
such  negligence  would  cause  another  to  commit  a  crime,  and  can  it 
be  said  a  person  is  negligent  who  does  not  anticipate  and  provide 
against  the  thousand  ways  through  or  by  which  crime  is  committed? 
Is  it  not  requiring  of  the  ordina-ry  business  man  more  diligence  than 
can  be  maintained  on  principle,  or  is  practicable,  if  he  is  required  to 
protect  and  guard  his  business  transactions  so  that  he  cannot  be  held 
liable  for  the  criminal  acts  of  another?  If  so,  why  should  not  the  neg- 
ligence of  the  owner  of  goods  which  are  stolen  excuse  the  bona  fide 
purchaser?"  And,  referring  to  the  argument  that  such  a  measure 
of  liability  is  required  to  promote  the  free  interchange  of  commercial 
paper  (a  view  which  seems  to  have  been  influential  in  the  Pennsyl- 
vania case  of  Garrard  v.  Haddan),  the  court  well  said :  "At  the  present 
day  negotiable  paper  is  not  ordinarily  freely  received  from  unknown 
persons.  Forgeries,  however,  are  not  confined  to  such.  But  the  neces- 
sities of  trade  and  commerce  do  not  require  the  law  to  be  so  construed 
as  to  compel  a  person  to  perform  a  contract  he  never  made  and  which 
it  is  proposed  to  fasten  on  him  because  some  one  has  committed  a  for- 
gery or  other  crime." 

In  Burrows  v.  Klunk,  70  Md.  451,  17  Atl.  378,  3  L.  R.  A.  576,  14 
Am.  St.  Rep.  371,  the  Maryland  Court  of  Appeals  emphasizes  the 
distinction  between  a  note  in  blank  as  to  the  amount,  when  signed 


EEAL  DEFENSES  l'^ 

and  delivered  to  another  for  use,  and  a  note  complete  on  its  face  when 
signed  and  delivered,  in  which  has  been  written  the  sum  payable,  the 
da^e,  time  of  payment,  and  name  of  the  payee.  "In  such  case,"  it  is 
held,  "there  can  be  no  inference  that  the  defendant  authorized  any  one 
to  increase  the  amount  simply  because  blank  spaces  were  left  in  which 
there  was  room  enough  to  insert  a  larger  sum." 

No  one  questions  the  proposition  that,  where  a  party  to  commercial 
paper  intrusts  it  to  another  with  a  blank  thereon  designed  to  be  filled 
up  with  the  amount,  such  party  is  liable  to  a  bona  fide  holder  of  the 
instrument  for  the  amount  filled  in,  though  it  be  larger  than  was  stipu- 
lated with  the  person  to  whom  immediate  delivery  was  made.  Van 
Duzer  v.  Howe,  21  N.  Y.  531.  So,  also,  a  note  executed  with  a  blank 
therein  for  a  statement  of  the  place  of  payment  is  not  avoided  in  the 
hands  of  a  bona  fide  holder  for  value  by  the  insertion  in  the  blank  of 
a  place  different  from  that  agreed  upon  by  the  original  parties.  Red- 
lich  V.  Doll,  54  N.  Y.  234,  13  Am.  Rep.  573.  But,  where  there  is  no 
blank  for  that  purpose  when  the  note  is  indorsed,  the  insertion  of  an 
obligation  to  pay  interest  is  a  material  alteration  which  invalidates  the 
instrument  as  against  the  indorser.  McGrath  v.  Clark,  56  N.  Y.  34, 
15  Am.  Rep.  372.  In  the  case  last  cited  the  note,  when  indorsed,  ended 
with  the  word  "at,"  followed  by  a  space  in  which  the  maker,  after 
indorsement,  inserted  a  place  of  payment,  adding  the  words  "with  in- 
terest" ;  but  no  suggestion  appears  to  have  been  made  that,  because  the 
space  left  was  large  enough  to  allow  the  insertion  of  these  words,  the 
indorser  was  negligent  and  could  be  charged  with  the  amount  of  the 
note,  including  the  interest,  on  that  ground.  On  the  contrary,  as  the 
law  then  stood,  he  was  relieved  of  all  liability  whatever  as  the  eflfect  of 
the  unauthorized  alteration.  Now,  however,  under  the  negotiable  in- 
struments law  (Laws  1897,  p.  745,  c.  612,  §  205)  he  would  be  liable 
on  the  paper  according  to  its  original  tenor. 

To  sustain  the  judgment  in  the  case  at  bar  in  view  of  the  instruc- 
tions under  which  the  issues  were  submitted  to  the  jury,  we  must  hold 
that  the  indorser  of  a  promissory  note,  the  amount  of  which  has  been 
fraudulently  raised  after  indorsement  by  means  of  a  forgery,  is  liable 
upon  the  instrument  in  the  hands  of  a  bona  fide  holder  for  the  1117 
creasedTmount,  because  of  negligence  in  indorsing  the  same  when  there 
were  spaces  thereon  which  rendered  the  forgery  easy,  though  the  note 
was  complete  in  form.  To  do  this  would  be  to  create  a  contract 
through  the  agency  of  negligence ;  for  the  action  is  not  in  tort  for 
damages,  but  upon  the  contract  as  expressed  in  the  note.  But,  apart 
from  any  question  as  to  the  form  in  which  the  indorser  is  sought  to  be 
charged,  I  am  of  opinion  that  noliabiHty_-On  the  part  of  the  indorser 
for  the  amount  of  such  a  note  as  raised  can  be  predicated'simply  upon 
tlje  fact  that  such  spaces  existed  thereon.  This  conclusion  I  base  upon 
the  authorities  to  that  effect  which  I  have  already  discussed,  and  upon 
Moore  Cases  B.&  N.— 12 


ITS  DEFENSES 

what  seems  to  me  to  be  considerations  of  sound  reason  independent  of 
judicial  authority. 

An  averment  of  neghgence  necessarily  imports  the  existence  of  a 
duty.  What  duty  to  subsequent  holders  of  a  promissory  note  is  im- 
posed by  the  law  upon  a  person  who  is  requested  to  indorse  the  paper 
for  the  accommodation  of  the  maker  and  who  complies  with  such  re- 
quest? It  is  a  complete  instrument  in  all  respects — as  to  date,  name  of 
payee,  time  and  place  of  payment,  and  amount.  There  are,  it  is  true, 
spaces  on  the  face  of  the  instrument  in  which  it  is  possible  to  insert 
words  and  figures  which  will  enlarge  the  amount  and  still  leave  the 
note  apparently  a  genuine  instrument ;  in  other  words,  there  is  room 
for  forgery.  On  what  theory  is  the  indorser  negligent  because  he 
places  his  name  on  the  papeF]without  firsf  seeing  to  it' that  these  spaces' 
are  so  occupied  by^cross-lines  or  otherwise  as  to  render  forgery  less 
feasible  ?"Tt  can  only"  be  on  the  theory  that  he  is  bound  to  assume  that 
those  to  whom  he  delivers  the  paper  or  into  whose  hands  it  may  come 
will  be  likely  to  commit  a  crime  if  it  is  comparatively  easy  to  do  so.  I 
deny  that  there  is  any  such  presumption  in  the  law.  It  would  be  a 
stigma  and  reflection  upon  the  character  of  the  mercantile  community 
and  constitute  an  intolerable  reproach  of  which  they  might  well  com- 
plain as  without  justification  in  practical  experience  or  the  conduct 
of  business. 

That  there  are  miscreants  who  will  forge  commercial  paper  by  raising 
the  amount  originally  stated  in  the  instrument  is  too  true,  and  is  evi- 
denced by  the  cases  in  the  law  reports  to  which  we  have  had  occasion 
to  refer;  but  that  such  misconduct  is  the  rule,  or  is  so  general  as  to 
justify  the  presumption  that  it  is  to  be  expected  and  that  business 
men  must  govern  themselves  accordingly,  has  never  yet  been  asserted 
in  this  state,  and  I  am  not  willing  to  sanction  any  such  proposition 
either  directly  or  by  implication.  On  the  contrary,  the  presumption 
is  that  men  will  do  right  rather  than  wrong.  See  Bradish  v.  Bliss,  35 
Vt.  326.  As  was  said  by  Judge  Cullen  in  Critten  v.  Chemical  Nat. 
Bank,  171  N.  Y.  219,  224,  63  N.  E.  969,  57  L.  R.  A.  529,  it  is  not 
the  law  that  the  drawer  of  a  check  is  bound  so  to  prepare  it  that  nobody 
else  can  successfully  tamper  with  it.  Neither  is  it  the  law  that  the 
indorser  of  a  promissory  note  complete  on  its  face  may  be  made  liable 
for  the  consequences  of  a  forgery  Thereof  simply  because  there  were 
ipaces.  thereon  which  rendered  the  forgery  easier  than  would  other- 
wise have  been  the  case. 

I  think  the  judgment  of  the  Appellate  Division  should  be  reversed 
and  a  new  trial  granted,  with  costs  to  abide  the  event. 


EEAL  DEFENSES 


179 


CRUCHLEY  V.  CLARANCE. 
(Court  of  King's  Bench.  1813.     2  Maule  &  S.  90.) 

This  was  an  action  against  the  defendant  as  drawer  of  a  bill  of  ex- 
change for  £200.  The  declaration  contained  several  counts,  and  in  one 
stated  the  bill  to  have  been  made  payable  to  the  order  of  the  plaintiff, 

and  in  another  to  the  order  of  (thereby  meaning  to  the  order 

of  such  person  as  the  defendant  should  cause  to  be  named  and  inserted 
in  the  said  bill  as  payee),  and  then  averred  that  the  defendant  caused 
the  name  of  the  plaintiff  to  be  inserted,  etc.  At  the  trial  before  Lord 
Ellenborough,  C.  J.,  at  the  London  sittings  after  last  term,  it  appeared 
that  the  bill  had  been  drawn  by  the  defendant  in  Jamaica  upon  one 
Henry  Man,  of  London,  the  defendant  leaving  a  blank  for  the  name 
of  the  payee,  and  had  afterwards  been  negotiated  in  this  country  by 
one  Vashon,  who  indorsed  it  to  the  plaintiff  in  payment  of  an  old  debt, 
and  the  plaintiff  inserted  his  own  name  as  the  payee.  A  verdict  was 
found  for  the  plaintiff*. 

Denman  moved  to  enter  a  nonsuit  or  for  a  new  trial,  on  the  ground 
that  the  plaintiff  had  no  right  to  insert  his  name  in  the  bill;  and  he 
said  it  was  distinguishable  from  Russel  v.  Langstaffe,  Doug.  513,  be- 
cause there  the  bill  was  filled  up  by  one  of  the  original  parties. 

Lord  Ellenborough,  C.  J.  As  the  defendant  has  chosen  to  send 
the  bill  into  the  world  in  this  form,  the  world  ought  not  to  be  deceived 
by  his  acts.  The  defendant  by  leaving  the  blank  undertook  to  be  an- 
swerable for  it  when  filled  up  in  the  shape  of  a  bill. 

Le  Blaxc,  J.  It  is  the  same  thing  as  if  the  defendant  had  made  the 
bill  payable  to  bearer. 

BaylEy,  J.  The  issuing  the  bill  in  blank  without  the  name  of  the 
j)ayee  was  an  authority  to^a/bona  fide  holder  to  insert  the  name. 

Per^Curiam.    Rule  refused. 


BOSTON  STEEL  &  IRON  CO.  v.  STEUER. 

(Supreme  Judicial  Court  of  INIassachusetts,  Suffolk.  1903.     1S3  Mass.  140,  GG 

N.  E.  646,  97  Am.  St.  Rep.  426.) 

Contract  for  $1,823.25  for  work  done  and  materials  furnished  for  a 
building  of  the  defendant  numbered  811  on  Beacon  street  in  Boston. 
Writ  dated  April  11,  1899. 

At  the  trial  in  the  superior  court  before  Bishop,  J.,  without  a  jury, 
the  judge  excluded  certain  evidence  oft'ered  by  the  defendant  and  re- 
fused to  make  certain  rulings  requested  by  the  defendant.  He  found 
for  the  plaintiff  in  the  sum  of  $2,043.86,  and  the  defendant  alleged  ex- 
ceptions. 


ISO  DEFENSES 

LoRixG,  J.  The  only  question  in  issue  between  the  parties  in  t}:is 
case  is  the  right  of  the  defendanL.to  be  credited  with  two  sums,  of 
$200  and~$4'00,  respectively,  under  the  following  circurnstances : 

~^n  Deceniber  31,  lS9S7the  defendant's  KiJsband  owed  the  plaintiff 
$1,781.30,  for  ironwork  furnished  by  it  to  him  in  the  construction  of  a 
house.  No.  819  Beacon  street.  On  being  pressed  for  payment,  the  de- 
fendant's husband,  on  January  21,  1899,  delivered  to  the  plaintiff  the 
defendant's  check  for  $200,  payable  to  the  plaintiff.  It  is  stated  in  the 
bill  of  exceptions  that  on  February  2,  1899,  "he  paid  the  plaintiff  the 
further  sum  of  $400  in  a  check  made  by  said  Jennie  D.  Steuer."  But 
it  appears  from  the  auditor's  report,  which  was  before  the  court  and 
is  referred  to  in  the  bill  of  exceptions,  that  the  plaintiff's  manager's 
name  was  Newcomb,  and  that  his  story  was  that  the  check  for  $400 
"was  brought  to  him  at  his  office  on  Devonshire  street  by  Mr.  Steuer 
in  response  to  further  demands  for  money,  and  that  it  was  made  out 
in  blank  and  filled  up  by  himself,  Mr.  Steuer  being  unwilling  that  it 
should  be  made  for  more  than  $200,  while  Mr.  Newcomb  insisted  that 
it  should  be  for  the  larger  amount,  and  so  made  it,  with  Mr.  Steuer's 
consent,  and  applied  it  to  his  debt."  The  defendant's  story  was  "that 
she  gave  the  check  to  Mr.  Newcomb  at  her  house." 

In  addition  to  the  iron  furnished  the  defendant's  husband  for  819 
Beacon  street,  the  defendant's  husband  had  ordered  two  iron  columns 
and  a  base  plate  from  the  plaintiff  for  another  house.  No.  811  Beacon 
street,  which  the  plaintiff  supposed  was  Steuer's  until  his  manager  was 
told  on  March  10th  that  it  belonged  to  defendant's  wife.  These  two 
columns  and  base  plate  were  delivered  on  December  22,  1898,  and  at  the 
rate  charged  in  the  bill  of  items  were  worth  $150.35.  From  December 
to  March  there  were  negotiations  between  the  defendant's  husband  and 
the  plaintiff"  for  a  contract  by  which  all  the  ironwork  for  811  Beacon 
street  should  be  furnished  by  the  plaintiff  for  a  fixed  sum,  payments 
on  account  to  be  made  as  each  floor  was  finished;  and  on  or  about 
March  1,  1899,  the  plaintiff's  manager  submitted  to  the  defendant  a 
written  contract  to  this  effect.  On  March  10th  this  was  returned  by 
the  defendant's  husband  with  the  statement  already  referred  to,  that 
811  Beacon  street  belonged  to  his  wife,  and  that  the  contract  should 
be  made  with  her.  No  written  contract  was  ever  made  between  the 
plaintiff  and  the  defendant,  but  the  plaintiff  went  forward  and  delivered 
the  ironwork  for  two  of  the  six  stories  of  the  house,  part  being  deliv- 
ered before  March  10th  and  part  after  that  date.  The  last  was  de- 
livered on  March  18th,  when  the  plaintiff  stopped  because  it  had  not 
been  paid  for  what  it  had  done.  Thereupon  this  action  was  brought  to 
recover  the  reasonable  value  of  the  materials  furnished  and  work  done. 

At  the  trial  the  defendant  contended  "that  the  amount  of  said  pay- 
ments should  be  credited  to  her  in  this  action,  on  the  ground  that  they 
were  payments  required  by  the  plaintiff  to  be  made  in  advance  on  ac- 
count of  her  said  building  numbered  811  Beacon  street,  and  that  the 
checks  were  given  to  her  said  husband,  as  her  agent,  to  make  such  pay- 


REAL  DEFENSES  181 

ments,"  and  "offered  evidence  of  her  instructions  to  her  husband  as  to 
the  use  and  appHcation  of  said  checks,  not  made  in  the  presence  of  the 
plaintiff  or  anyone  representing  him,  and  claimed  that  the  same  should 
be  admitted  in  evidence.  The  court  declined  to  admit  the  same,  and 
the  defendant  duly  excepted  to  the  exclusion."  The  other  exceptions 
taken  at  the  trial  have  been  waived,  and  the  question  raised  by  this  ex- 
ception is  the  only  matter  now  before  us. 

The  plaintiff  has  argued  that  it  did  not  appear  but  that  these  instruc- 
tions were  given  in  a  private  conversation  between  husband  and  wife. 
But  on  a  fair  construction  of  the  bill  of  exceptions- we  do  not  think 
that  the  evidence  can  be  taken  to  have  been  excluded  on  that  ground. 
It  is  stated  there  that  the  "defendant  offered  evidence  of  her  instruc- 
tions to  her  husband, as  to  the  use  a'nd  application  of  said  checksTnoF 
made  in  the  presence  of  the  plaintiff  or  anyone'  representing  him." 
This  must  be  taken  to  be  a  statement  of  the  ground  of  the  objection, 
and  the  ruling  must  be  taken  to  be  a  ruling  that  competent  evidence 
was  offered  and  was  excluded  because  not  made  in  the  presence  of  the 
plaintiff  or  of  some  one  representing  it. 

The  judge  before  whom  the  case  was  tried  without  a  jury  found 
"that  neither  of  said  payments  was  required  by  the  plaintiff  to  be  made 
in  advance  on  account  of  her  said  building  numbered  811  Beacon  street, 
and  that  neither  of  them  was  made  according  to  any  agreement  for 
payment  to  be  made  on  account  of  said  811  Beacon  street,  and  that  no 
floor  in  said  building  was  completed  at  the  time  either  of  said  payments 
was  made,  and  that  said  payments  were  made  by  said  Bernard  Steuer 
on  account  of  his  building  numbered  819  Beacon  street,  and  were  re- 
ceived by  the  plaintiff  on  account  therefor." 

This  finding  makes  the  evidence  excluded  immaterial  so  far  as  the 
check  for  $200  is  concerned.  If  this  evidence  had  been  admitted,  the 
defendant's  case  on  the  $200  check  would  have  been  this  :  A  check  pay- 
able  to  the  plaintiff  is  handed  by  the  drawer  to  her  hu¥5a'nd,  tonBF 
delivered  by  him  to  the  plaintiff  in  payment  of  a  debt  to  become  due 
from  the  drawer  of  the  check  to  the  payee,  and  is  fraudulently  handed 
by_th£jiusband  to  the  payee  of  the  check,  in  payment  of  a  debt  due 
from  him  to  the  payee,  and  is  accepted  by  the  payee  in  good  faith  in 
payment  of  that  debit.  '-^--, 

In  such  a  case.Jhe  payee  of  the  check  is  a  bona  fide  purchaser  of  the 
check_for  value,  without  notice,  and  the  drawer  could  not  set  up  her 
husband's  f raucl  in  defense  of  the  check,  nor  maintain  an  action  foe 
money  had  and  received  after  payment  of  it  on  discovering  the  fraud. 

The  fact  that  the  plaintiff  is  the  payee  of  a  negotiable  security  does 
not  prevent  him  from  becoming  a  bona"  fide  purchaser  of  it  at  common 
law,  with  all  the  rights  incident  to  a  purchaser  for  value  thereof  with- 
out notice.  That  was  decided  in  Watson  v.  Russell,  3  B.  &  S.  34,  and 
affirmed  in  the  Exchequer  Chamber  in  the  same  case,  5  B.  &  S.  968. 
To  the  same  effect  is  Poirier  v.  Morris,  2  El.  &  Bl.  89,  and  Nelson  v. 
Cowing,  6  Hill  (N.  Y.)  336,  339.    Munroe  v.  Bordier,  8  C.  B.  862,  and 


182  DEFENSES 

Armstrong  v.  American  Exchange  Bank,  133  U.  S.  433,  453,  10  Sup. 
Ct.  450,  33  L.  Ed.  747,  seem  to  go  on  this  ground.  The  case  of  Fair- 
banks V.  Snow,  145  :Mass.  153,  13  N.  E.  596,  1  Am.  St.  Rep.  446,  might 
have  been  decided  on  this  ground,  but  was  disposed  of  on  common- 
law  principles. 

That  payment  of  the  pre-existing  debt  makes  the  holder  a  purchaser 
for  value  in  this  commonwealth  was  settled  law  before  the  negotiable 
instruments  act  was  enacted.  Blanchard  v.  Stevens,  3  Cush.  162,  50 
Am.  Dec.  723 ;  Stoddard  v.  Kimball,  6  Cush.  469 ;  Goodwin  v.  Massa- 
chusetts Loan  &  Trust  Co.,  152  ^fass.  189,  199,  25  N.  E.  100;  Na- 
tional Revere  Bank  v.  Morse,  163  Mass.  383,  40  N.  E.  180 ;  Holden 
V.  Phoenix  Rattan  Co.,  168  Mass.  570,  47  N.  E.  241. 

The  checks  in  question  in  the  case  at  bar  were  given  after  the  nego- 
tiable instruments  act  (St.  1898,  c.  533 ;  Rev.  Laws,  c.  7Z)  went  into 
effect,  and  are  governed  by  its  provisions.  The  plaintiff  is  a  holder  in 
due  course  of  the  $200  check,  within  Rev.  Laws,  c.  7Z,  §  69.  This 
section  is  taken  from  section  29  of  the  English  bills  of  exchange  act  of 
1882,  and  Watson  v.  Russell  is  cited  in  Chalmers,  Bills  of  Exchange 
(5th  Ed.)  89,  as  an  example  of  a  person  who  is  a  holder  in  due  course 
within  that  section.  It  was  stated  by  Lord  Russell  in  Lewis  v.  Clay,  67 
L.  J.  Q.  B.  (N.  S.)  224,  that  a  payee  of  a  promissory  note  cannot  be 
a  holder  in  due  course  within  section  29  of  the  English  bills  of  exchange 
act  of  1882.  In  Hardman  v.  Wheeler,  [1902]  1  K.  B.  361,  372,  it  was 
pointed  out  that  this  statement  of  Lord  Russell  was  obiter,  and  it  was 
also  pointed  out  that  in  Herdman  v.  Wheeler,  as  in  Lewis  v.  Clay,  it 
was  not  necessary  to  pass  on  that  point.  The  case  of  Watson  v.  Rus- 
sell, 3  B.  &  S.  34;  S.  C.  5  B.  &  S.  968,  does  not  seem  to  have  been 
brought  to  the  attention  of  the  court  in  either  of  these  cases.  And 
in  neither  case  does  the  court  seem  to  have  taken  into  consideration  the 
practice  of  a  check  being  procured  drawn  by  another  to  be  used  in  pay- 
ing a  debt  due  from  the  person  procuring  the  check  to  the  person  to 
whom  the  debtor  has  had  the  check  made  payable.  The  practice  is  rec- 
ognized in  the  case  of  foreign  bills  of  exchange,  and  the  person  pro- 
curing the  bill  is  known  technically  as  the  "remitter"  of  it.  See  Mun- 
roe  V.  Bordier,  8  C.  B.  862,  where  it  was  held  that  the  payee  of  a  for- 
eign bill,  who  took  it  from  the  remitter  of  it  for  value,  was  a  bona  fide 
purchaser  for  value.  It  was  this  practice  which  was  appHed  in  Watson 
v.  Russell,  3  B.  &  S.  34,  in  case  of  a  check.  In  our  opinion,  a  check 
received  by  the  payee  named  in  it,  in  payment  of  a  debt  due  from  the 
remitter  of  the  check,  is  received  by  a  holder  in  due  course  within  sec- 
tion 69  of  the  negotiable  instruments  act  (St.  1898,  c.  533 ;  Rev.  Laws, 
c.  7Z),  and  that  is  so  even  if  we  should  follow  the  decision  made  in 
Hardman  v.  Wheeler,  [1902]  1  K.  B.  361,  and  hold  that  a  payee  never 
can  be  a  holder  in  due  course  to  whom  the  bill  has  been  "negotiated," 
within  the  last  clause  of  section  31  of  our  act  (Rev.  Laws,  c.  73),  which 
is  taken  from  section  20  of  the  English  bills  of  exchange  act  of  1882 
(45  &  46  Vict.  c.  61).     The  rule  that  payment  of  a  pre-existing  debt 


REAL   DEFENSES  183 

makes  the  holder  a  holder  for  value  was  adopted  in  Rev.  Laws,  c.  7Z, 
§42. 

But  so  far  as  the  check  for  $400  is  concerned,  we  are  of  opinion  that 
the  evidence  should  have  been  admitted.  If  the  defendant's  story  were 
found  to  be  true,  namely,  that  she  handed  the  check  to  the  plaintiff's 
manager  at  her  house,  this  check  would  stancTon  tin  same  footing  as 
the  other^  But  the  story  of  the  plaintiff's  manager  was  tliat  the  ctfCck 
was  brought  to  him  by  the  defendant's  husband,  signed  in  blank  by 
the  defendant,  and  that  it  was  filled  up  by  him  for  the  sum  of  $400, 
with  the  husband's  consent.  We  assume,  in  favor  of  the  plaintiff,  that 
this  is  to  be  interpreted  to  mean  that  the  only  blank  in  the  check,  when 
it  was  brought  to  the  plaintiff's  manager  by  the  defendant's  husband, 
was  in  the  amount  for  which  it  was  to  be  drawn. 

It  had  been  held  in  England,  before  the  bills  of  exchange  act  in  1882, 
that  such  a  piece  of  paper  is  not  a  check ;  that  one  who  buys  it  buys 
an  incompkic  iiistruiii'  ut  auj  his  rigiUs  depend  upon  the  real  authort- 
'fy^^wliich-llie- signer  had  in  fact  given  in  the  matter.  Awde  v.  Dixon,  6 
Exch.  869.  See,  also.  Hatch  v.  Searles,  2  Sm.  &  G.  147;  Hogarth 
v.  Latham,  3  Q.  B.  D.  643 ;  Watkin  v.  Lamb,  85  L.  T.  (N.  S.)  483 ; 
France  v.  Clark,  26  Ch.  D.  257,  262.  And  see  Ledwich  v.  McKim,  5? 
N.  Y.  307.  Such  an  incomplete  instrument  is  prima  facie  authority 
to_filLJn--tb€-bla«k,-  Crutchly  v.  Mann,  5  Taunt.  529;  Swan  v.  North 
British  Australasian  Co.,  2  H.  &  C.  175,  184.  But  this  prima  facie 
authority,  as  we  have  said,  may  be  met  by  evidence  of  what  authority 
was  in  fact  given,  as  was  done  in  Aw^de  v.  Dixon,  6  Exch.  869.  If  the 
blanks  are  filled  up  before  the  instrument  is  negotiated,  it  does  not  lie 
in  the  maker's  mouth  to  set  up  that  it  was  incomplete  when  delivered 
by  him.  In  such  a  case,  a  plaintiff  who  buys  for  value  without  notice 
gets  the  rights  of  a  bona  fide  purchaser  for  value  of  a  negotiable  instru- 
ment ;  and  the  fact  that  there  was  no  authority  for  filling  up  the  blanks 
as  they  were  filled  up,  or  the  fact  that  the  paper  was  otherwise  wrong- 
fully dealt  with,  is  no  defense.  Schultz  v.  Astley,  2  Bing.  N.  C.  544; 
Foster  v.  Mackinnon,  L.  R.  4  C.  P.  704,  712. 

In  this  commonwealth  it  was  held,  on  the  other  hand,  that  a  note 
with  a  blank  for  the  payee's  name  was  a  promissory  note,  and  not  an 
incomplete  paper,  which  might  be  made  into  a  promissory  note.  Ives 
v.  Farmers'  Bank,  2  Allen,  236.  And  in  Frank  v.  Lilienfeld,  ZZ  Grat. 
(Va.)  377,  it  was  held  that  the  purchaser  in  good  faith  of  a  note  in 
printed  form,  indorsed  by  the  defendant,  where  the  date,  payee's  name, 
and  amount  had  been  left  blank,  had  an  absolute  right  to  fill  in  the 
amount  advanced  thereon  and  to  fill  up  the  other  blanks.  It  also  has 
been  held  here,  as  it  has  been  held  in  England,  that  such  a  blank,  in 
the  absence  of  other  evidence,  might  be  filled  in  by  a  bona  fide  pur- 
chaser (see  Androscoggin  Bank  v.  Kimball,  10  Cush.  Z7Z) ;  and  that  a 
bona  fide  purchaser  of  such  a  paper,  which  is  filled  before  it  is  nego- 
tiated, has  the  rights  of  a  purchaser  for  value  without  notice  (see  \Miit- 
more  v.  Nickerson,  125  Mass.  496,  28  Am.  Rep.  257;  Binney  v.  Globe 


1S4  DEFENSES 

National  Bank,  150  Mass.  574,  23  N.  E.  380,  6  L.  R.  A.  379).    See,  also, 
in  this  connection,  Herdman  v.  Wheeler,  [1902]  1  K.  B.  361. 

It  is  not  necessary  to  consider  how  a  blank  check  would  be  dealt  with 
in  ]\Iassachusetts  at  common  law,  where  the  amount  in  place  of  the 
name  or  date  is  lacking.  The  negotiable  instruments  act  (Rev.  Laws, 
c.  7Z,  §  31)  adopted  the  English  law  on  this  point,  and  it  follows  that, 
if  Newcomb's  story  is  to  be  believed,  the  blank  check  brought  to  him 
must  be  treated  as  an  incomplete  instrument  and  not  as  a  check. 

The  defendant  further  contends  that  it  was  inadmissible  to  show 
the  real  authority  given  to  the  husband  in  the  absence  of  the  plaintiff, 
and  cites  in  support  of  that  contention  Markey  v.  Mutual  Benefit  Ins. 
Co.,  103  Mass.  78,  93,  and  Byrne  v.  Massasoit  Packing  Co.,  137  Mass. 
313.  These  are  cases  where  the  act  done  was  within  the  ostensible 
scope  of  the  authority  given  an  agent,  and  for  that  reason  the  real  au- 
thority could  not  be  invoked.  The  only  act  relied  on  as  giving  osten- 
sible authority  to  the  husband  in  the  case  at  bar  was  putting  him  in 
possession  of  the  blank  check.  There  was  no  more  ostensible  authority 
here  than  there  was  in  Awde  v.  Dixon,  6  Exch.  869,  Hogarth  v.  Lath- 
am, 3  Q.  B.  D.  643,  or  Watkin  v.  Lamb,  85  L.  T.  (N.  S.)  483.  An 
incomplete  check  gives  an  authority  to  fill  it  up  which  is  only  a  prima 
facie  authority.  It  does  not  import  an  ostensible  authority  to  fill  it  up, 
which  is  absolute. 

The  plaintiff's  rights  _under  the  blank  check  _f or  $400,  and  to  the 
money  received  for  it,  depend  upon  the  authority  actually  given  by 
the  defendant  when  she  signed  it,  and  the  evidence  offered  should  have 
been  admitted  in  respect  of  the  credit  claimed  for  the  $400  paid  under 
the  blank  check. 
~The  entry  must  be:  Exceptions  sustained. 


BAXENDALE  v.  BENNETT. 

(Court  of  Appeal,  1S7S.    3  Q.  B.  D.  525.) 

Action  commenced  on  the  10th  July,  1876,  on  a  bill  of  exchange, 
dated  the  11th  of  March,  1872,  for  i50.  drawn  by  W.  Cartwright  and 
accepted  by  the  defendant,  and  of  which  the  plaintiff  was  the  holder, 
and  for  interest.  At  the  trial  before  Lopes,  J.,  without  a  jury,  at  the 
Hilary  sittings  in  Middlesex,  the  following  facts  were  proved: 

The  bill,  dated  the  11th  of  March,  1872,  on  which  the  action  was 
brought,  purported  to  be  drawn  by  one  W.  Cartwright  on  the  defend- 
ant, payable  to  order  at  three  months'  date.  It  was  indorsed  in  blank 
by  Cartwright,  and  also  by  one  H.  T.  Cameron.  The  plaintiff  received 
the  bill  from  Cameron  on  the  3d  of  June,  1872,  and  was  the  bona  fide 
holder  of  it,  without  notice  of  fraud,  and  for  a  valuable  consideration. 

One  J.  F.  Holmes  had  asked  the  defendant  for  his  acceptance  to  an 
accommodation  bill,  and  the  defendant  had  written  his  name  across 
a  paper  which  had  an  impressed  bill  stamp  on  it,  and  had  given  it  to 


REAL  DEFENSES  1S5 

Holmes  to  fill  in  his  name,  and  then  to  use  it  for  the  purpose  of  rais- 
ing money  on  it.  Afterwards  Holmes,  not  requiring  accommodation, 
returned  the  paper  to  the  defendant  in  the  same  state  in  which  he  had 
received  it  from  him.  The  defendant  then  put  it  into  a  drawer,  which 
was  not  lock£d,_ai  hi§.AYriting"table  at  hjs  diambers,  to  which  his  clerk, 
laundress,  and  other  persons  coming  there  had  access.  He  had  never 
authorized  Cartwright  or  any  person  to  fill  up  the  paper  with  a  draw- 
er's name,  and  he  believed  that  it  must  have  been  stolen  from  his 
chambers.  — — — —  - 

"OiTthese  facts  the  learned  judge  found  that  the  bill  was  stolen  from 
the  defendant's  chambers,  and  the  name  of  the  drawer  afterwards 
added  without  the  defendant's  authority;  but  that  the  defendant  had 
so  negligently  dealt  with  the  acceptance  as  to  have  facilitated  the  theft. 
He  therefore  ruled,  upon  the  authority  of  Young  v.  Grote,  4  Bing.  253, 
and  Ingham  v.  Primrose,  7  C.  B.  (N.  S.)  82;  28  L.  J.  C.  P.  294,  that 
the  defendant  was  liable,  and  directed  judgment  to  be  entered  for  the 
plaintiff  for  £50.  and  costs.* 

Bramwell,  L.  J.  I  am  of  opinion  that  this  judgment  cannot  be 
supported.  The  defendant  is  sued  on  a  bill  alleged  to  have  been  drawn 
by  W.  Cartwright  on  and  accepted  by  him.  In  very  truth  he  never 
accepted  such  a  bill ;  and,  if  he  is  to  be  held  liable,  it  can  only  be  on 
the  ground  that  he  is  estopped  to  deny  that  he  did  so  accept  such  a  bill. 
Estoppels  are  odious,  and  the  doctrine  should  never  be  apphed  without 
a  necessity  for  it.  It  never  can  be  applied  except  in  cases  where  the 
person  against  whom  it  is  used  has  so  conducted  himself,  either  in  what 
he  has  said  or  done,  or  failed  to  say  or  do,  that  he  would,  unless  estop- 
ped, be  saying  something  contrary  to  his  former  conduct  in  what  he  had 
said  or  done,  or  failed  to  say  or  do.  Is  that  the  case  here?  Let  us  ex- 
amine the  facts.  The  defendant  drew  a  bill  (or  what  would  be  a  bill 
had  it  had  a  drawer's  name)  without  a  drawer's  name,  addressed  to 
himself,  and  then  wrote  what  was  in  terms  an  acceptance  across  it.  In 
this  condition^  it,  not  being  a  bill^was  stolen  _fjom  him,  filled  up  with  a 
drawer's  name,  and  transferred  to  the  plaintiff,  a  bona  fide  holder  for 
value.  It  may  be  that  no  crime  was  committed  in  the  filling  in  of  the 
cirawer's  name,  for  the  thief  may  have  taken  it  to  a  person,  telling  him 
it  was  given  by  the  defendant  to  the  thief  with  authority  to  get  it  filled 
in  with  a  drawer's  name  by  any  person  he,  the  thief,  pleased.  This 
may  have  been  believed,  and  the  drawer's  name  bona  fide  put  by  such 
person.  I  do  not  say  such  person  could  have  recovered  on  the  bill.  I_ 
am  of  opinion  he  could  not ;  but  what  I  wish  to  point  out  is  that  the 
bill  might  ^e  made  a'complete  instrument  without  the  commission  of 
any  crime  in  the  completion.  But  a  crime  was  committed -in  this  case 
by  the  stealing  of  the  document,  and  without  that  crime  the  bill  could 
not  have  been  complete,  and  no  one  could  have  been  defrauded.  Why 
is  not  the  defendant  at  liberty  to  show  this?     Why  is  he  estopped? 

*  The  arguments  of  counsel  and  parts  of  the  opinions  are  omitted. 


1S6  DEFENSES 

What  has  he  said  or  done  contrary  to  the  truth,  or  which  should  cause 
any  one  to  beheve  the  truth  to  be  other  than  it  is  ?  Is  it  not  a  rule  that 
every  one  has  a  right  to  suppose  that  a  crime  will  not  be  committed,  and 
to  act  on  that  belief?  Where  is  the  limit  if  the  defendant  is  estopped 
here?  Suppose  he  had  signed  a  blank  check,  with  no  payee,  or  date, 
or  amount,  and  it  was  stolen ;  would  he  be  liable  or  accountable,  not 
merely  to  his  banker  the  drawee  but  to  a  holder?  If  so,  suppose  there 
was  no  stamp  law,  and  a  man  simply  wrote  his  name,  and  the  paper 
was  stolen  from  him,  and  somebody  put  a  form  of  a  check  or  bill  to  the 
signature ;  would  the  signer  be  liable  ?  I  cannot  think  so.  But  what 
about  the  authorities?  It  must  be  admitted  that  the  cases  of  Young  v. 
Grote,  4  Bing.  253,  and  Ingham  v.  Primrose,  7  C.  B.  (N.  S.)  82,  28  L. 
].  C.  P.  294,  go  a  long  way  to  justify  this  judgment;  but  in  all  those 
cases,  and  in  all  the  others  where  the  alleged  maker  or  acceptor  has 
been  held  liable,  he  has  voluntarily  parted  with  the  instrument.  It  has 
not  been  got  from  him  by  the  commission  of  a  crime.  This,  undoubted- 
ly, is  a  distinction,  and  a  real  distinction.  The  defendant  here  has  not 
voluntarily  put  into  any  one's  hands  the  means,  or  part  of  the  means, 
for  committing  a  crime. 

But  it  is  said  that  he  has  done  so  through  negligence.  I  confess  I 
think  he  has  been  negligent ;  that  is  to  say,  I  think,  if  he  had  had  this 
paper  from  a  third  person,  as  a  bailee  bound  to  keep  it  with  ordinary 
care,  he  would  not  have  done  so.  But  then  this  negligence  is  not  the 
proximate  or  effective  cause  of  the  fraud.  A  crime  was  necessary  for 
its  completion.     *     *     * 

Brett,  L.  J.  In  this  case  I  agree  with  the  conclusion  at  which  my 
Brother  BramwELL  has  arrived,  but  not  with  his  reasons.  The  defend- 
ant signed  a  blank  acceptance  and  gave  it  to  a  person  who  wanted 
money  that  he  might  get  it  discounted;  that  person  sent  thej^lank 
acceptance  back  to  the  defendant,  who  put  it  into  a  drawer  in  his  room ; 
the  room  was  not  a  place  of  general  resort,  and  the  drawer  into  which 
the  acceptance  was  put  was  left  unlocked;  somebody,  not  a  servant  of 
the  defendant,  stole  it,  and  it  was  filled  up  by  a  different  person  from 
him  to  whom  the  acceptance  was  originally  given  and  who  had  re- 
turned it.  On  these  facts.  Lopes,  J.,  held  that  the  defendant  had  been 
guilty  of  negligence,  and  was  therefore  liable  on  the  bill  to  the  plaintiff. 

Bramwell,  L.  J.,  says  that  the  defendant  is  not  liable  because,  if 
he  be  guilty  of  negligence,  the  negligence  is  not  the  proximate  or  ef- 
fective cause  of  the  fraud.  It  seems  to  me  that  the  defendant  never 
authorized  the  bill  to  be  filled  in  with  a  drawer's  name,  and  he  cannot 
be,  sued  on  it.  I  do  not  think  it  right  to  say  that  the  defendant  was  neg- 
ligent. The  law  as  to  the  liability  of  a  person  who  accepts  a  bill  in 
blkiiFis  that  he  gives  an  apparent  authority  to  the  person  to  whom  he 
issues  it  to  fill  it  up  to  the  amount  that  the  stamp  will  cover.  He  does 
not  strictly  authorize  him,  but  enables  him  to  fill  it  up  to  a  greater 
amount  than  was  intended.  Where  a  man  has  signed  a  blank  accept- 
ance, and  has  issued  it,  and  has  authorized  the  holder  to  fill  it  up,  he  is 


PERSONAL  DEFENSES  1^' 

liable  on  the  bill,  whatever  the  amount  may  be,  though  he  has  given 
secret  instructions  to  the  holder  as  to  the  amount  for  which  he  shal' 
fill  it  up.  He  has  enabled  his  agent  to  deceive  an  innocent  party,  and 
he  is  liable.  Sometimes  it  is  said  that  the  acceptor  of  such  a  bill  is  liable 
because  bills  of  exchange  are  negotiable  instruments,  current  in  like 
manner  as  if  they  were  gold  or  bank  notes;  but  whether  the  acceptor 
of  a  blank  bill  is  liable  on  it  depends  upon  his  having  issued  the  accept- 
ance intending  it  to  be  used.  No  case  has  been  decided  where  the  ac- 
ceptor has  been  held  liable  if  the  instrument  has  not  been  dehvcred  by 
the  acceptor  to  another  person. 

In  this  case  it  is  true  that  the  defendant,  after  writing  his  name 
across  the  stamped  paper,  sent  it  to  another  person  to  be  used.  \\'hen 
he  sent  it  to  that  person,  if  he  had  filled  it  in  to  any  amount  that  the 
stamp  would  cover,  the  defendant  would  be  liable,  because  he  sent  it 
with  the  intentipn  that  it  should  be  acted  upon ;  but  it  was  sent  back 
to  the  defendant,  and  he  was  then  in  the_same  condition  as  if  he  had 
never  issued  the  acceptance. ~The  case  is  this  :  The  defendant  accepts  a 
bill  and  puts  it  into  his  drawer ;  it  is  as  if  he  had  never  issued  it  with 
the  intention  that  it  should  be  filled  up ;  it  is  as  if  after  having  accepted 
the  bill  he  had  left  it  in  his  room  for  a  moment  and  a  thief  came  in  and 
stole  it.  He  has  never  intended  that  the  bill  should  be  filled  up  by  any- 
body, and  no  person  was  his  agent  to  fill  it  up. 

Then  it  has  been  said  that  the  defendant  is  liable  because  he  has 
been"ncglii;riit  ;  but'was  the  defendant  negligent?  As  observed  by 
Blackburn,  J.,  in  Sivan  v.  North  British  Australasian  Company,  2  H. 
&  C.  175,  32  L.  J.  (Ex.)  273,  there  must  be  the  neglect  of  some  duty 
owing  to  some  person.  Here  how  can  the  defendant  be  negligent  who 
owes  no  duty  to  anybody?  Against  whom  was  the  defendant  negli- 
gent, and  to  whom  did  he  owe  a  duty?  He  put  the  bill  into  a  drawer 
in  his  own  room.  To  say  that  was  a  want  of  due  care  is  impossible. 
It  was  not  negligence  for  two  reasons:  First,  he  did  not  owe  any 
duty  to  any  one;  and,  secondly,  he  did  not  act  otherwise  than  in  a 
way  which  an  ordinary  careful  man  would  act.     *     *     * 

Baggallay,  L.  J.,  concurred  that  the  judgment  ought  to  be  entered 
for  the  defendant.    Judgment  for  defendant. 


II.  Personal  Defenses  ' 


CLARK  V.  PEASE. 

(Supreme  Judicial  Court  of  New  Ilauipshire,  ISGO.     41  N.  H.  414.) 
Tliis  case  is  reported  on  page  152,  supra. 

5  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
lOS-115. 


188  DEFENSES 


STARR  V.  STARR. 

(Supreme  Court  of  Ohio,  1S5S.     9  Ohio  St.  74.) 

Error  to  the  court  of  common  pleas  of  Athens  county.    Reversed  in 
the  district  court. 

On  the  8th  day  of  October,  1857,  the  plaintiff  filed  in  the  court  of 
common  pleas  of  Athens  county  her  petition  against  the  defendant, 
stating  that  Philip  M.  Starr,  in  his  lifetime,  made  and  delivered  to 
plaintiff  his  certain  promissory  note  in  writing  for  the  payment,  to 
plaintiff'  or  bearer,  of  $5,000  on  demand ;  that  said  Philip  M.  Starr, 
after  the  delivery  of  the  note,  departed  this  life,  leaving  it  unpaid ;  and, 
that  demand  had  been  made  of  the  defendant,  as  his  executor,  for  the 
allowance  or  payment  of  the  note,  and  that  he  refused  to  do  either. 
Whereupon  judgment  is  asked  for  the  amount  of  the  note  and  interest. 
To  this  petition  the  defendant  answered:  (1)  That  his  said  testator, 
Philip  M.  Starr,  never  made  the  note  in  the  petition  mentioned,  and 
never  assumed  and  promised  as  therein  stated.  (2)  That,  if  said  tes- 
tator did  make  said  note,  the  same  was  made  without  any  considera- 
tion, or  value  whatever,  moving  from  the  plaintiff  to  said  testator. 

At  the  May  term,  1858,  of  said  court,  the  cause  was  submitted  to 
the  court,  and  the  court  found  "that  the  said  promissory  note  was 
executed  and  delivered  by  the  said  testator,  as  the  said  plaintiff'  hath 
in  her  said  petition  averred.  And  the  court  further  find  that  the  said 
note  was  given  by  the  said  testator  a  short  time  before  his  death  to  the 
said  plaintiff,  who  was  the  daughter  of  said  testator,  as  an  advancement 
and  gift  by  the  said  testator  to  the  said  plaintiff,  and  as  some  provision 
for  her  out  of  his  said  estatej  and  without  any  other  or  different  con- 
sideration whatever.  And  the  court,  being  of  opinion  that,  by  law, 
natural  love  and  affection,  and  a  desire  on  the  part  of  the  testator  to 
provide  for  and  advance  the  said  plaintiff,  are  not  a  good  and  sufficienj; 
consideration  to  enable  the  plaintiff  to  recover  on  said  note,  do  find  that 
said  note  was  without  consideration,  as  said  defendant  hath  in  his  said 
answer  averred."  Thereupon  judgment  was  rendered  against  the 
plaintiff  for  costs,  and  she  excepted  to  the  ruling  and  judgment.  To 
reverse  this  judgment,  the  plaintiff  filed  a  petition  in  error  in  the  dis- 
trict court,  insisting  that  the  court  of  common  pleas  erred:  (1)  In 
ruling  "that,  by  law,  natural  love  and  affection,  and  a  desire  on  the 
part  of  the  testator  to  provide  for  and  advance  the  said,  plaintiff,  are 
not  a  good  and  sufficient  consideration  to  enable  the  said  plaintiff  to 
recover  on  said  note."  (2)  In  finding  that  the  note  was  without  con- 
sideration. (3)  In  rendering  judgment  against  the  plaintiff,  when  it 
should  have  been  for  her. 

The  questions  thus  presented  were  reserved  in  the  district  court  for 
decision  by  the  supreme  court. 


PERSONAL   DEFENSES  180 

Pr;R  Curiam.  The  judgment  of  the  court  of  common  picas  must 
be  affirmed,  upon  the  principles  settled  in  the  case  of  Hamor  v.  Moore's 
Adm'rs,  8  Ohio  St.  239. 

The  note  in  the  case  before  the  court  was  a  gift,  and  its  delivery  was 
the  delivery^  of  a  promise  only,  and  not  of  the  thing  promised.  The 
promise  being;_unfulfillcd  at  thQ_dcath  of  th£-maker  of  the  note,  the 
gift  failed..  And  as  the  prornisejvas  without  consideration,  and  could 
not  have  been  enforced  against  the  maker  in  his  lifetime,  it  cannot  be 
against  his  executor. 

Judgment  affirmed. 


MILLER  V.  FINLEY. 

(Supreme  Court  of  Michigan.  1S72.     26  Mich.  249,  12  Am.  Rep.  30G.) 

Campbell,  J.°  Miller  sued  below  upon  a  joint  and  several  promis- 
sory note.  Both  defendants  pleaded  the  general  issue,  and  Hugh  Fin- 
ley,  jr.,  appended  to  his  plea  an  affidavit  denying  the  execution  of  the 
note  by  himself.  No  notice  of  any  kind  was  filed  or  served  with  the 
plea. 

Upon  the  trial  the  defense  was  rested  upon  several  grounds.  It 
was  claimed  that  Hugh  Finley,  sr.,  signed  the  note  without  the  con- 
sent of  Hugh  Finley,  jr.,  his  son,  who,  it  was  alleged,  refused  to  assent 
to  having  him  sign,  and  after  the  note  had  been  delivered  as  the  sole 
note  of  the  son.  It  was  further  claimed  that  when  he  signed  it  he  was 
in  such  a  state  of  drunkenness,  proctired  by  the  original  payee,  that  he 
wasTiot  responsible  for  his  acts.  It  was  also  set  up  that  the  note  was 
one  of  several  Stained  by  fraud,  as  the  price  of  a  worthless  patent,  for 
a  horse-collar  fastener. 

Miller  claimed  as  a  bona  fide  holder.  Judgment  was  rendered  for 
defendants  below,  and  he  now  brings  error.     *     *     * 

The  testimony  of  defendants  tended  to  prove  that  the  elder  Finley 
knew  nothing  of  the  trade,  and  was  drunk  when  he  signed  the  note, 
and  that  the  payee  had  wholly,  or  in  part,  procured  it.  The  testimony 
for  plaintiff  tended  to  show  that  the  old  man  was  fully  aware  of  the 
transaction  between  his  son  and  the  payee,  and  took  some  part  in  it. 
The  evidence  of  the  son  does  not  indicate  any  extreme  intoxication  on 
the  part  of  the  father.  His  own  testimony  goes  further.  He  seems, 
however,  to  have  recollected  the  signing,  and  its  genuineness  is  not  in 
issue.  There  is  no  question  in  the  case  as  to  the  identity  of  the  paper. 
The  note  he  signe3"was  the  one  the  son  supposed  he  was  signing,  and 
there  was  no  substitution  of  one  paper  for  another.  The  defense  rests 
upon  the  ground  of  fraud,  and  not  of  illegality,  and  while,  if  the  old 
man's  story  is  true,  the  note  would  be  voidable  as  against  the  payee,  it 
would  not  be  a  nullity  as  to  all  persons. 

8  A  portion  of  the  opinion  Is  omitted. 


190  DEFENSES 

There  is  nothing  on  the  face  of  the  paper  to  cast  suspicion  upon  its 
cliaracter,  and  it  can  only  be  impeached,  in  the  hands  of  a  holder  for 
value,  by  evidence  that  he  took  it  under  circumstances  which  rendered 
him  guilty  of  bad  faith.  Goodman  v.  Simonds,  20  How.  343,  15  L.  Ed. 
934;  Murray  v.  Lardner,  2  Wall.  110,  17  L.  Ed.  857;  Goodman  v. 
Harvey,  4  Ad.  &  El.  870;  Uther  v.  Rich,  10  Ad.  &  El.  784;  2  Parsons 
on  Bills,  280;  Redfield  &  Bigelow's  Leading  Cases  on  Bills  and  Notes, 
239,  257. 

The  proof  must  show  that  the  holder  for  value,  who  takes  a  note 
with  no  earmarks  of  fraud  or  illegality,  has  had  notice  of  such  a  nature 
that  he  could  not  honestly  take  the  paper  without  further  inquiry.  The_. 
facts,  of  which  he  must  have  either  knowledge  or  notice,  must  be  such 
as  go  to  the  defects  of  title.  The  defects  set  up  here  were  the  fraud 
alleged  to  have  been  practiced  on  the  elder  Finley,  by  taking  advantage 
of  his  drunkenness,  and  the  cheat,  if  there  was  any,  whereby  the  young- 
er Finley  was  induced  to  purchase  the  patent.  The  latter  we  have 
intimated  was  not  properly  in  the  case.  But,  if  it  had  been  admissible, 
it  would,  perhaps,  be  of  no  special  importance,  as  presented  by  the  rec- 
ord as  it  stands.  We  have  found  nothing  in  the  testimony  tending  to 
show  that  Miller  had  heard  or  known  anything  about  either  of  these 
defenses.     *     *     * 

Judgment  reversed. 


III.  Discharge '  «  / , 

BURBRIDGE  v.  MANNERS.  V<  \  / 

(Nisi  Prius,  1812.    3  Camp.  193.)  Q    *. 

This  was  an  action  on  a  promissory  note  for  ilOl.  15s.  5d.  dated    "^  ^ 
Uth  October,  1810,  drawn  by  J.  Finney,  payable  three  months  after 
date  at  Fraser  &  Co.'s  to  the  defendant,  indorsed  by  him  to  one  Tinson 
and  by  Tinson  to  the  plaintiff. 

The  note  was  regularly  presented  for  payment  in  the  forenoon  of 
the_day  it  became  due^  when  payment  was  refused;  and  in  the  after- 
noon of  the  same  day  the  plaintiff  caused  notice  of  its  dishonor  to  be 
sent  to  the  defendant. 

Park,  for  the  defendant,  objected  that  this  was  not  sufficient  notice 
of  the  dishonor.  Finney,  the  maker  of  the  note,  had  the  whole  of  the 
day  it  became  due  to  pay  it,  and  till  the  last  minute  of  that  day  it 
could  not  be  considered  as  dishonored.  The  notice  therefore  stated 
what  was  untrue,  and  was  evidently  premature. 

Lord  EllEnborough.  I  think  the  note  was  dishonored  as  soon  as 
the  maker  had  refused  payment  on  the  day  when  it  became  due,  and 

7  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
116-121. 


DISCHARGE  101 

the  notice  sent  to  the  defendant  must  have  answered  all  the  purposes 
for  which  notice  in  such  cases  is  required.  The  holder  of  a  bill  or 
note  gives  notice  of  its  dishonor  in  reasonable  time  the  day  after  it  is 
due ;  but  he  may  give  such  notice  as  soon  as  it  has  been  dishonored 
the  day  it  becomes  due,  and  the  other  party  cannot  complain  of  the 
extraordinary  diligence  used  to  give  him  information. 

By  the  defendant's  evidence  it  appeared  that  this  bill,  being  in  the 
hands  of  Maude  &  Co.,  was  paid  in  by  them  when  indorsed  only  by  the 
defendant  to  their  bankers,  Mastcrman  &  Co.,  who  were  to  present  it 
for  payment.  Maude  &  Co.  had  received  it  from  Finney,  the  maker, 
as  a  collateral  security  for  an  acceptance  of  his,  then  in  their  hands 
overdue.  On  the  10th  of  January,  four  days  before  the  note  was  due, 
some  person  unknown  came  to  Masterman  &  Co.'s,  where  it  lay,  paid  it, 
and  carried  it  away  without  its  being  canceled,  or  any  memorandum 
being  made  upon  it.  However,  it  had  been  indorsed  by  Tinson,  and 
had  come  into  tlie  hands  of  the  plaintiff,  before  it  was  due. 

Park  contended  that  after  the  bill  had  been  once  paid,  it  could  not 
be  reissued,  and  he  relied  upon  Beck  v.  Robley,  1  H.  Bl.  89,  note. 

Lord  EllEnborough.  Payment  means_payrnent  in  due  course,  and 
not  by  anticipation.  Had  the  bill  been  due  before  it  came  into  the  plain- 
tiff's hands,  he  must  have  taken  it  with  all  its  infirmities.  In  that  case 
it  would  have  been  his  business  to  inquire  minutely  into  its  origin  and 
history.  But  receiving  it  before  it  was  due,  there  was  nothing  to 
awaken  his  suspicion.  I  agree  that  a  bill  paid  at  maturity  cannot  be 
reissued,  and  that  no  action  cari  afterwards  Be  maintained  upon  it  by 
a  subsequehr indorsee.  A  payment  before  it  becomes  due,  however,  I 
tKmT:""does"froT  extinguish  it  any  more  than  if  it  were  merely  dis-. 
counted.  A  contrary  doctrine  would  add  a  new  clog  to  the  circula- 
tlonof  bills  of  exchange  and  promissory  notes ;  for  it  would  be  impos- 
sible to  know  whether  there  had  not  been  an  anticipated  payment  of 
them.  It  is  the  duty  of  bankers  to  make  some  memorandum  on  bills 
and  notes  which  have  been  paid ;  but  if  they  do  not,  the  holders  of 
such  securities  cannot  be  affected  by  any  payment  made  before  they 
are  due.  While  a  bill  of  exchange  is  running,  it  remains  in  a  negotiable 
state.  I  cannot  limit  its  negotiability  the  last  four  days  before  it  be- 
comes due  more  than  the  first  four  days  after  it  is  drawn.  ^ 

Verdict  for  the  plaintiff. 


SCHWARTZMAN  v.  POST  et  al. 

(Supreme  Court,  Appellate  Dhision,  First  Department.  New  York,  1903.     94 
App.  Div.  474,  84  N.  Y.  Supp.  922,  87  N.  Y.  Supp.  872.) 

Appeal  by  the  plaintiff",  Abraham  Schwartzman,  from  an  order  of 
the  Appellate  Term  of  the  Supreme  Court,  entered  in  the  office  of  the 
clerk  of  the  county  of  New  York  on  the  16th  day  of  November,  1903, 
which  order  reversed  a  judgment  of  the  City  Court  of  the  city  of  New 


192  DEFENSES 

York  in  favor  of  the  plaintiff  entered  in  the  office  of  tlie  clerk  of  said 
court  on  the  15th  day  of  February,  1903,  upon  the  verdict  of  a  jury, 
and  also  (as  stated  in  the  notice  of  appeal)  from  a  judgment  of  reversal 
entered  in  the  office  of  the  clerk  of  the  city  of  New  York  on  the  13th 
day  of  January,  1904,  upon  said  order  of  the  Appellate  Term. 

Per  Curiam.  Determination  of  Appellate  Term  affirmed,  with  costs, 
on  the  opinion  of  the  court  below,  and  judgment  absolute  ordered  for 
defendant,  with  costs. 

Van  Brunt,  P.  J.,  and  Patterson,  Ingraham,  and  McLaughlin, 
JJ.,  concur. 

Laughlin,  J.  (dissenting).  According  to  the  testimony  of  the  plain- 
tiff', the  note  was  not  paid,  nor  was  it  surrendered  up  to  the  defendant. 
Post  upon  the  understanding  that  it  was  to  be  deemed  paid,  but  on  the 
distinct  agreement  that  the  defendants  were  to  remain  liable  for  the 
balance  for  which  plaintiff  has  recovered  in  this  action.  The  defend- 
ants did  not,  therefore,  in  my  opinion,  by  this  surrender  become  hold- 
ers of  the  note  in  their  "own  right,"  within  the  intent  and  meaning  of 
subdivision  5  of  section  200  of  the  negotiable  instruments  law.  Laws 
1897,  p.  744,  c.  612,  and  the  transaction  did  not  constitute  a  discharge 
of  the  note.  The  defendant  Post  merely  became  the  bailee  thereof  for 
the  payee. 

The  following  is  a  part  of  the  opinion  delivered  by  Freedman,  P.  J., 
in  the  court  below : 

This  action  was  brought  to  recover  an  alleged  balance  of  $1,750, 
claimed  to  be  due  upon  a  demand  note  for  $5,000,  dated  May  1,  1899, 
payable  to  the  order  of  the  maker,  the  defendant  Post,  and  indorsed 
by  him  and  his  father,  the  defendant  Postawalsky.  Postawalsky  was 
not  served  with  the  summons  and  did  not  appear.  After  a  trial  by  a 
jury,  a  verdict  for  the  amount  claimed  was  rendered  in  favor  of  the_^ 
plaintiff.  The  plaintiff's  complaint  originally  averred  that  he  is  "now 
the  lawful  owner  and  holder"  of  the  note  in  suit,  but  it  was  subse- 
quently amended  by  striking  out  the  allegation  that  plaintiff  was  the 
"holder."  The  answer  denied  the  delivery  of  the  note  to  the  plaintiff, 
and  that  he  was  the  owner  thereof,  and  set  up,  among  other  defenses, 
that  the  note  had  been  delivered  up  and  surrendered  to  Post,  the  maker, 
about  April  9,  1900,  and  that  defendant  had  ever  since  been  the  holder 
thereof. 

At  the  beginning  of  the  trial,  the  note,  in  pursuance  of  a  notice  given 
by  plaintiff's  attorney,  was  produced  by  the  defendant  Post,  and  by 
plaintiff's  attorney  offered  and  received  in  evidence.  The  testimony 
of  the  transaction  out  of  which  the  cause  of  action  arose,  as  given  by 
the  parties,  is  very  conflicting,  and  a  reading  of  the  record  convinces 
one  that  neither  party  has  given  a  complete  statement  of  the  facts. 
The  plaintiff's  version,  however,  was  accepted  and  believed  by  the 
jury,  and  must,  therefore,  for  the  purposes  of  this  appeal,  be  taken 
as  true,  and,  briefly  stated,  is  as  follows : 


DISCIIAKGE 


193 


In  1898  plaintiff  and  the  defendant  Postawalsky  were  copartners  in 
the  cloak  husincss.  This  partnership  was  dissolved  by  mutual  consent 
in  1899,  and  plaintiff  received  the  note  in  question  for  his  interest  in 
said  business.  Subsequently,  upon  demanding  payment  of  the  note 
of  the  defendant.  Post  told  the  plaintiff  that  he  (Post)  could  not  pay 
the  full  amount  of  the  note,  but  would  pay  $2,(300  if  the  plaintiff  would 
give  up  the  note.  This  offer  was  afterwards  increased  by  Post  to  the 
sum  of  $2,500.  Plaintiff'  then  authorized  his  brother  (Schwartz)  to 
continue  the  negotiations  with  Post.  For  some  reason,  not  appearing, 
the  plaintiff  had  placed  the  note  with  one  Kohn,  who  testifies  that  he 
also  called  upon  Post  in  regard  to  obtaining  payment  of  the  note,  and 
that  Post  refused  to  pay  in  full.  Plaintiff's  brother  (Schwartz)  testifies 
to  similar  conversations  with  Post.  In  all  of  the  conversations  Post  is 
alleged  to  have  said,  in  substance,  that,  unless  the  amount  off'ered  was 
accepted  by  the  plaintiff,  and  the  note  given  up,  that  he.  Post,  would 
"protect"  himself;  that  "I  have  been  through  the  mill  once  before,  and 
know  how  to  take  care  of  myself."  These  witnesses  also  testify  that 
Post  promised  to  pay  the  balance  of  his  indebtedness,  but  insisted  upon 
the  surrender  of  the  note  to  him.  Matters  between  the  parties  cul- 
minated in  a  meeting  of  Post,  Kohn,  one  Kohler,  attorney  for  Post,  one 
Essberg,  attorney  for  plaintiff  or  his  brother,  Schwartz,  and  Schwartz, 
at  Essberg's  ofifice,  at  which  time  Post  paid  $2,750  and  Essberg  $500  to 
Schwartz,  who  then  gave  the  note  to  Essberg.  The  $3,250  was  then 
paid  plaintiff,  and  the  note  eventually  given  to  Post,  although  when 
Post  came  into  possession  of  the  note  does  not  appear,  nor  is  it  shown 
for  what  reason  Essberg  contributed  the  sum  of  $500  towards  the 
amount  paid  the  plaintiff. 

At  the  close  of  the  plaintiff's  case,  and  again  at  the  close  of  the  whole 
case,  the  defendant's  attorney  moved  to  dismiss  the  complaint  upon  the 
ground  that  "the  plaintiff  has  failed  to  establish  a  cause  of  action,  and 
upon  the  ground  that  by  his  own  admission  of  the  delivery  and  surren- 
der of  the  note  by  him  to  the  defendant  [the  plaintiff]  extinguished  any 
liability  on  the  note.  *  *  *  My  contention  is  that  the  delivery  of 
that  note  by  the  plaintiff  to  the  defendant  constituted  a  discharge  and 
cancellation  of  that  note." 

I  am  of  the  opinion  that  the  defendant  Post  is  right  in  this  conten- 
tion. The  cause  of  action  is  based  wholly  upon  the  note.  Subdivision 
5  of  section  200  of  the  Negotiable  Instruments  Law  (Laws  1897,  p. 
744,  c.  612)  provides  that  a  negotiable  instrument  is  discharged  "when 
the  principal  debtor  becomes  the  holder  of  the  instrument  at  or  after 
maturity  in  his  own  right."  The  instrument  in  question  was  a  nego- 
tiable note.  The  term  "holder"  is  defined  in  section  2,  p.  720,  as  fol- 
lows "  'Holder'  means  the  payee  or  indorsee  of  a  bill  or  note  who  is 
in  the  possession  of  it,  or  the  bearer  thereof."  And  section  3  contains 
the  following  definition :  "Person  Primarily  Liable  on  Instrument. — 
Moore  Cases  B.«&  N. — 13 


194  DEFENSES 

The  person  'primarily'  liable  on  an  instrument  is  the  person  who,  by 
the  terms  of  the  instrument,  is  absolutely  required  to  pay  the  same." 

The  words  of  subdivision  5  of  section  200,  "in  his  own  right,"  mere- 
ly exclude  such  a  case  as  that  of  a  maker  acquiring  the  instrument  in 
purely  a  representative  capacity.  The  case  at  bar  comes  exactly  within 
these  provisions.  Post  was  the  maker  of  the  note,  and  primarily  liable 
thereon.  It  was  surrendered  to  him,  and  he  became  the  "holder" 
thereof  without  fraud  or  mistake,  in  "his  own  right."  Prior  to  the 
adoption  oF'the  negotiable  instruments  law  it  has  been  held  that,  if  a 
note  be  surrendered  by  the  payee  to  the  maker,  the  whole  claim  is  dis- 
charged. Taft'ray  v.  Davis,  124  N.  Y.  164-170,  26  N.  E.  351,  11  L.  R. 
A.  710;  Ellsworth  v.  Fogg,  35  Vt.  355  ;  Kent  v.  Reynolds,  8  Hun,  559; 
Beach  v.  Endress,  51  Barb.  570,  affirmed  in  Larkin  v.  Hardenbrook, 
90  N.  Y.  333,  43  Am.  Rep.  176. 

\\'hether  the  plaintiff  can  maintain  an  action  upon  the  original  in- 
debtedness, or  upon  the  defendant  Post's  promise  to  pay  the  balance 
due,  the  consideration  therefor  being  the  plaintiff's  surrender  of  the 
note,  need  not  now  be  determined.     *     *     * 


BLENN  V.  LYFORD. 

(Supreme  Judicial  Court  of  Maine,  1879.     70  Me.  149.) 

Assumpsit  by  indorsee  against  the  maker  of  a  promissory  note. 

After  the  note  was  read  in  evidence,  the  defendant  offered  the  re- 
ceipt following,  signed  by  M.  E.  Rice,  the  payee,  which  was  excluded : 
"Received  of  H.  H.  Lyford  two  notes  of  hand,  dated  in  December  last, 
for  three  hundred  dollars  each,  one  payable  in  six  months  from  date, 
the  other  seven  months  from  date.  These  notes  are  for  my  benefit,  ex- 
cept for  his  note  due  me  April  15,  1872,  for  $225.  The  balance  of  the 
two  above-named  $300  notes  I  am  to  pay." 

Joseph  H.  Richardson,  called  by  the  defendant,  testified  in  substance 
that  he  bought  the  note  in  suit  of  M.  E.  Rice  in  the  fore  part  of  April, 
1872 ;  that  it  had  about,  four  months  to  run ;  that  it  then  had  on  the 
back  the  words,  "Holden  without  demand  or  notice,  M.  E.  Rice,"  now 
erased ;  that  he  kept  it  two  or  three  months  after  it  became  due.  On 
being  asked  whether  M.  E.  Rice  then  paid  it  and  took  it  up,  the  answer, 
on  objection  of  the  plaintiff,  was  excluded. 

Various  other  questions  to  similar  purports,  and  other  testimony 
tending  to  show  equitable  defenses,  was  excluded  on  objection. 

By  consent  of  parties,  the  case  was  withdrawn  from  the  jury  and  re- 
ported to  the  law  court.  If  the  foregoing  rulings  were  wrong,  and 
if  the  evidence  excluded  was  admissible  and  would  constitute  a  valid 
defense  against  this  plaintiff,  the  case  is  to  stand  for  trial;    if  inad- 


DISCHARGE  19i5 

missiblc,  or  insufficient  to  constitute  such  defense,  a  default  is  to  be 
entered  for  the  amount  of  the  note,  with  interest  since  due. 

The  remaining  material  facts  sufficiently  appear  in  the  opinion.^ 

Appleton,  C.  J.  Tiiis  is  an  action  of  assumpsit  on  the  following 
note:  "St.  Albans,  .Me.,  Dec.  2,  1871. 

"Seven  months  from  date,  value  received,  I  promise  to  pay  M.  E. 
Rice,  or  order,  three  hundred  dollars,  at  any  bank  in  Bangor. 

"H.  H.  Lyford." 

The  note  was  indorsed  in  blank:  "M.  E.  Rice."  The  following 
words  were  also  on  the  back  of  the  note,  erased  with  ink,  but  legible : 
"Holdcn  without  demand  or  notice.    M.  E.  Rice." 

Granting  the  presumption  that  the  plaintiff  is  a  bona  fide  holder  for 
value~of  the  note  before  maturity^  that  presumption  may  be  overcome 
by  proof. _^ 

"^t^appcars  from  the  testimony  that  the  note  was  indorsed  to  one 
Richardson,  for  value,  in  the  April  following  its  date,  that  it  was  not 
paid  at  maturity,  and  that  about  three  months  after  its  dishonor  he 
delivered  it  to  Rice,  the  payee. 

The^plaintiff  then  received  the  note  in  suit,  when  overdue.  The 
note,  remaining  unpaid  after  maturity,  was  dishonored,  and  it  was 
the  duty  of  the  indorsee  to  make  inquiries  concerning  it.  If  he  takes 
it,  though  he  gave  a  full  consideration  for  it,  he  does  so  on  the  credit 
of  the  indorser.  He  holds  the  note  subject  to  all  equities  with  which 
it  may  be  incumbered.  ' 

'As~tHe~  plaintiffs  the  indorsee  of  a  dishonored  note,  it  was  com- 
petent for  the  defendant  to  show  that  it  was  an  accommodation  note, 
and  that  it  had  been  paid  by  the  party  for  whose  accommodation  it 
was  given. 

That  the  note  was  for  the  accommodation  of  the  payee  is  abundantly 
shown  by  his  receipt  of  the  date  of  February  22,  1872,  as  well  as  by  the 
testimony  offered  and  excluded. 

The  note  being  for  the  accommodation  of  Rice,  it  was  his  4uty  to 
pay  it.  The  note  being  found  after  dishonor  in  the  hands  of  the  one 
bound  to  pay  it,  the  presumption  is  that  he  paid  it.  2  Par.  N.  &  B. 
220.  It  was  competent  to  show  that  in  fact  he  paid  it,  but  the  answer 
to  an  inquiry  whether  the  note  was  paid  by  Rice  was  excluded.  This 
was  erroneous. 

Assuming  the  note  to  have  been  paid  by  Rice,  it  was  the  same  as 
if  paid  by  the  maker.  It  was  paid  by  the  party  whose  duty  it  was  to 
pay  it.  The  purpose  for  which  it  was  given  has  been  accomplished. 
The  negotiability  of  a  note  ceases  after  its  payment  by  the  party  who 
should  rightfully  pay  it.  "Now  it  cannot  be  denied,"  says  Denman.  C. 
J.,  in  Lazarus  v.  Cowie,  43  E.  C.  L.  819,  "that  if  a  bill  be  paid  when  due 
by  the  person  ultimately  liable  on  it.  it  has  done  its  work,  and  is  no 
longer  a  negotiable  instrument.     *     *     *     Cut  the  drawer  of  an  ac- 

8  The  arguments  of  counsel  are  omitted. 


19C  DEFENSES 

conimodation  bill  is  in  the  same  situation  as  the  acceptor  of  a  bill  for 
value.  He  is  the  person  ultimately  liable,  and  his  payment  discharges 
the  bill  altogether." 

Rice,  when  he  took  up  the  note  in  suit,  had  no  right  of  action  against 
the  maker,  and  could  not  transfer  to  the  plaintiff  any  better  right  after 
maturity  than  he  had.  Edw.  B.  &  N.  564;  Fish  v.  French,  15  Gray 
-(Mass.)  520;  Tucker  v.  Smith,  4  Greenl.  (Me.)  415. 

In  the  cases  cited  by  the  plaintiff  there  are  most  important  differences 
from  the  one  under  consideration.  In  Bank  v.  Crow,  60  N.  Y.  85, 
the  plaintiff's  were  the  indorsees  of  the  note  for  value  and  before  ma- 
turity, and  were  consequently  to  be  protected.  In  Thompson  v.  Shep- 
herd, 12  Mete.  (Mass.)  311,  46  Am.  Dec.  676,  it  was  held  that  the 
indorsee  of  a  note,  who  receives  it  for  value  from  the  second  indorser, 
after  it  has  been  dishonored  by  the  maker,  can  recover  thereon  against 
the  maker,  although  he  knew  when  he  received  it  that  as  between 
the  maker  and  first  indorser  it  was  an  accommodation  note.  But  this 
is  upon  the  principle  affirmed  by  the  court  in  Woodman  v,  Churchill, 
52  Me,  58,  that  where  the  first  indorsee  of  a  promissory  note  acquires 
a  right  of  action  against  the  maker,  by  being  a  bona  fide  purchaser, 
without  notice  and  before  maturity,  he  can  transfer  a  good  title  as 
well  after  as  before  the  note  becomes  due. 

Exceptions  sustained. 


PRICE  V.  SHARP. 
(Supreme  Court  of  North  Carolina,  1842.    24  N.  C.  417.) 

RuFFiN,  C.  J.®  This  is  an  action  of  assumpsit  on  two  bills  of  ex- 
change by  the  plaintiff  as  an  indorser  of  Peebles,  Hall  &  Co.  against 
the  acceptor.  The  bills  were  drawn  on  the  10th  of  July,  1841,  by 
Peebles,  Hall  &  Co.,  of  Petersburg,  in  Virginia,  in  favor  of  F.  E.  Rives, 
on  the  defendant  Sharp,  of  Danville,  in  Virginia,  who  accepted  them, 
but  failed  to  pay  them  when  they  fell  due.  The  one  was  for  $783.85  at 
90  days,  and  the  other  for  $787.71  at  4  months,  from  date.  Upon  the 
failure  of  Sharp,  the  payee.  Rives,  returned  the  bills  to  the  drawers, 
Peebles,  Hall  &  Co.  for  payment;  and  they  accordingly  paid  him 
and  took  up  the  bills.  On  the  10th  of  December,  1841,  Peebles,  Hall 
&  Co.  indorsed  the  bills  to  the  present  plaintiff,  who  resides  in  Cas- 
well, in  this  state,  and  immediately  commenced  this  action  by  original 
attachment,  levied  on  the  estate  of  the  defendant,  situate  in  Caswell. 
The  indorsement  from  Peebles,  Hall  &  Co.  to  the  plaintiff  was  without 
consideration,  and  was  made  for  the  purpose  of  enabling  Price  to  take 
out  an  attachment  in  his  name  for  the  benefit  of  Peebles,  Hall  &  Co., 
and  the  present  action  was  accordingly  brought  for  their  use.  Upon  the 
return  of  the  attachment  the  defendant  gave  bail,  and  appeared  and 

9  The  statement  of  facts  is  omitted. 


DISCHARGE  l'J7 

pleaded,  first,  non  assumpsit,  and,  secondly,  by  way  of  special  plea 
in  bar,  the  facts  stated  respecting  the  indorsement  and  the  purpose  of 
it.  Upon  the  trial  the  facts  were  agreed  upon  as  here  stated,  and  upon 
them  his  honor  was  of  opinion  for  the  plaintiff,  and  so  instructed  the 
jury,  who  found  a  verdict  accordingly,  and  from  the  judgment  the 
defendant  appealed. 

For  the  defendant  it  has  been  insisted  that  the  plaintiff  cannot  main- 
tain this  action,  commenced  by  original  attachment,  because  it  is  not 
"brought  for  his  own  benefit,  but,  in  evasion  and  fraud  of  the  act  of 
1777,  for  that  of  Peebles,  Hall  &  Co.,  who  could  not  have  brought  it  in 
their  own  names,  according  to  the  case  of  Broghill  v.  Wellborn,  15 
N.  C.  511.  Whether  this  objection  be  valid  or  not,  if  taken  in  apt  time, 
it  is  not  now  necessary  to  say ;  for,  if  good,  it  comes  too  late.  Un- 
doubtedly the  holder  of  a  bill  may  indorse'i't  to  another  in  trust  for 
himself,  or  to  collect  as  his  agent,  and  the  indorsee  may  have  an  ac- 
tion against  the  acceptor  of  the  bill.  The  objection  is  not,  therefore, 
that  this  plaintiff  could  not  maintain  assumpsit  on  these  bills,  but  that 
he  cannot  commence  that  action  by  attachment,  but  should  have  done 
it  by  capias.  The  imputed  defect  lies  in  the  writ,  and  the  answer  is  ob- 
vious that,  by  accepting  the  declaration  and  pleading  to  it,  the  party 
waives  all  defects  in  the  process.  This  point  should  have  been  raised 
by  a  plea  in  abatement  or  in  some  other  method  before  pleading  in  bar. 

But  in  the  opinion  of  the  court  there  is  another  objection  to  the  plain- 
tiff's recovery,  which  has  more  force.  It  is  that  the  bills  could  not  be 
put  into  circulation  by  the  indorsement  of  Peebles,  Hall  &  Co.,  after 
those^persons  liad  paid  thernfo* Rives.  If  Rives'  name  had  been  put 
onTh^T)ills,  the  case  of  Beck  v.  Robley,  1  H.  Black.  89,  is  a  direct  au- 
thority against  this  action.  In  that  case  a  bill  was  drawn  by  Brown  on 
Robley,  payable  to  Hodgson  or  order.  Hodgson  put  his  name  on  the 
bill ;  and,  not  being  paid  when  due,  Hodgson,  without  striking  out  his 
blank  indorsement,  returned  the  bill  to  Brown,  and  he  took  it  up,  and 
afterwards  passed  it  to  Beck,  who  brought  the  action.  It  was  held 
that  when  the  bill  came  back  unpaid,  and  was  taken  up  from  the  payee 
by  the  drawer,  it  ceased  to  be  a  bill,  for  it  could  not  then  be  negotiated 
by  him  without  making  Hodgson  liable  thereon,  for  which  there  was 
no  color.  Between  that  case  and  the  present  there  is  but  one  point 
of  difference;  and  that  but  increases  the  difficulties  in  the  plaintiff's 
way.  Hodgson's  name  was  remaining  on  the  bill  when  he  returned  it 
to  Brown ;  whereas  it  does  not  appear  that  Rives  ever  put  his  name  on 
these  bills,  and  it  cannot  be  assumed  that  he  did.  But  waiving  that  for 
the  present,  the  case  cited  is  conclusive  for  the  defendant,  even  if 
Rives'  indorsement  were  on  the  bills. 

The  counsel  for  the  plaintiff',  however,  opposes  to  that  case  the  more 
recent  one  of  Callow  v.  Lawrence,  3  Maule  &  Selwyn.  95,  and  the 
language  there  used  by  Lord  EUenborough :  "That  a  bill  of  exchange 
is  negotiable  ad  infinitum,  until  it  has  been  paid  by,  or  discharged  in 
behalf  of,  the  acceptor;    and  that,  if  the  drawer  has  paid  the  bill,  it 


198  DEFENSES 

seems  he  may  sue  the  acceptor  on  the  bill,  and  if,  instead  of  suing  the 
acceptor,  he  put  into  circulation  upon  his  own  indorsement  only,  it 
does  not  prejudice  any  of  the  other  parties,  who  may  have  indorsed  the 
bill,  that  the  holder  should  be  at  liberty  to  sue  the  acceptor."  But  it 
seems  to  us  that  neither  the  case  itself,  nor  the  doctrine  here  quoted, 
when  correctly  understood,  shakes  the  principle  of  Beck  v.  Robley,  but 
rather  sustains  it.  No  one  can  deny  that  a  bill  is  negotiable  indefinitely 
until  payment.  But  the  question  is,  by  whom  may  it  be  negotiated? 
Why,  by  the  payee,  or  by  any  person  entitled  under  his  indorsement; 
and  the  acceptor  will  be  as  much  bound  to  pay  it  to  such  indorsee, 
however  remote,  as  he  was  to  the  payee  himself,  before  he  indorsed 
it.  But  it  does  not  follow  that  the  drawer  of  the  bill,  who  takes  it  up, 
after  dishonor,  from  the  payee,  is  to  be  considered  the  indorsee  of  the 
payee.  Far  from  it ;  for,  instead  of  claiming  from  the  payee  or  un- 
der him,  he  was,  in  truth,  liable  on  it  to  the  payee,  in  default  of  the 
acceptor,  and  in  discharge  of  the  liability  took  it  up.  Then  he  could 
not  look  to  the  payee  to  make  the  bill  good  to  him ;  and,  by  conse- 
quence, he  could  not  by  his  subsequent  indorsement  give  to  his  indorser 
the  right  to  such  recourse  against  the  payee.  But  as  that  would  be 
the  necessary  effect  of  such  indorsement,  if  allowed  at  all,  it  resulted 
that  in  such  a  case  the  law  would  not  allow  the  drawer  again  to  put 
his  bills  into  circulation.  That  the  payee  suffered  his  name  to  remain 
on  the  bill,  when  he  returned  it,  will  not  be  an  authority  to  the  drawer 
to  negotiate  it ;  for  it  was  not  left  there  to  give  credit  to  the  bill  with 
the  drawer,  or,  in  other  words,  as  an  indorsement,  but  merely  as  a  re- 
ceipt for  the  amount  paid  by  the  drawer,  animo  solvendi.  After  such 
payment  it  would  be  unjust  to  the  payee  to  allow  the  drawer  to  pass 
the  bill  on  the  responsibility  of  the  former ;  and,  therefore,  he  is  not 
permitted  to  pass  it  at  all.  With  this  reasoning,  the  passage  quoted 
from  Lord  Ellenborough  consists. 

In  Callow  V.  Lawrence  the  bill  was  not,  as  here  and  in  Beck  v.  Rob- 
ley,  payable  to  the  third  person,  but  was  payable  to  the  drawer's  or- 
der. After  acceptance  the  drawer  indorsed  it,  and  it  went  through 
several  hands,  and  was  finally  returned  to  the  drawer  by  the  holder, 
who  struck  out  all  indorsements  after  that  of  the  drawer,  and  received 
payment  from  him,  and  then  the  drawer  passed  the  bill  to  Callow ; 
and  it  was  held  that  the  latter  might  maintain  his  action  against  the 
acceptor.  A  bill  payable  to  the  drawer's  order,  when  accepted,  be- 
comes substantially  a  promissory  note  from  the  acceptor  to  the  drawer, 
being  an  express  promise  to  pay  the  drawer  or  his  assigns.  When  it 
comes  back  to  the  drawer,  he  is  remitted  to  his  original  rights  upon 
an  instrument  payable  to  himself,  and  may  sue  on  it,  without  noticing 
indorsements  that  had  been  made  of  it.  Dook  v.  Caswell,  2  N.  C.  18; 
Strong  V.  Spear,  2  N.  C.  214;  Callow  v.  Lawrence,  3  M.  &  S.  95.  It 
would  seem  to  follow  necessarily  that  the  drawer  might  again  indorse 
it ;  for  in  so  doing  he  passes  the  instrument  regularly  according  to  its 
face,  and  leaves  no  one  liable  to  his  indorsee  but  himself  and  the  ac- 


DISCHARGE 


199 


ceptor,  each  of  whom  ought  thus  to  be  hable.    Gomez  Scrra  v.  Berke- 
ley, 1  Wils.  46;   Guild  v.  Eager,  17  iMass.  615. 

Upon  this  distinction  between  bills  payable  to  a  third  person,  on  the 
one  hand,  and  a  promissory  note  or  bill  payable  to  the  drawer's  order, 
on  the  other,  are  obviously  founded  the  observations  of  Lord  Ellen- 
borough  in  the  case  cited.  He  admits  the  authority  of  Beck  v.  Robley, 
and  carefully  confnies  his  rule  to  the  case  then  before  him,  that  is  to 
say,  of  a  bill  payable  to  the  drawer's  order,  by  saying  "that  if,  instead 
of  suing  the  acceptor,  he  (the  drawer)  put  the  bill  into  circulation  up- 
on his  own  indorsement  only,  the  holder  might  sue  the  acceptor,"  which 
can  apply  to  no  case  but  that  of  a  bill  payable  to  the  drawer's  order  or 
a  promissory  note.  Then  he  immediately  proceeds  to  declare  further 
that  "the  case  would  be  different,  if  the  circulation  of  the  bill  would 
have  the  effect  of  prejudicing  any  of  the  indorsers,"  as  in  Beck  v.  Rob- 
ley  was  the  case.  The  other  judges  place  the  matter  in  a  still  clearer 
light.  Le  Blanc,  J.,  said :  "There  was  in  Beck  v.  Robley  no  color  to 
charge  Hodgson,  and,  striking  out  Hodgson's  indorsement,  the  bill 
could  not  possibly  be  negotiable."  And  Bayley,  J.,  who  is  high  author- 
ity upon  a  point  of  this  kind,  states  the  distinction  very  shortly  and 
happily  by  saying  that  "in  Beck  v.  Robley  payment  by  Brown  struck 
out  the  indorsement  of  Hodgson,  whereas  the  payment  by  Pywell  (the 
drawer  in  Callow  v.  Lawrence)  did  not,  in  legal  effect,  strike  out  Py- 
well's  own  indorsement,  so  as  to  render  the  bill  no  longer  negotiable." 
Thus  those  two  cases  stand  well  together.  The  principle  of  Beck  v. 
Robley  is  that  which  governs  this  case,  and  is  that  a  person  cannot  ne- 
gotiate paper,  when  by  so  doing  he  would  render  responsible  on  it  an- 
other person,  from  whom  he  had  taken  it  up,  under  a  prior  responsi- 
bility ;  while  the  principle  of  Callow  v.  Lawrence  is  that  a  person  who 
takes  up  paper  once  due  to  himself  may  again  put  it  into  circulation, 
provided  that,  in  so  doing,  he  exposes  no  person  to  a  prejudice  but  him- 
self or  those  who  are  legally  and  justly  liable  on  the  paper  before  him. 

In  considering  the  case  hitherto^it  has  been  treated  as  if  Rives  had 
put  ii^  name  onTlTe"l3ills,_in~wHich  case,  even,  we  have  seen  that  the 
law  is  against  the  plaintiff.  But  that  fact  is  otherwise  here,  or,  at  least, 
docs  not  appear,  whtch  is  the  same  thing.  In  Beck  v.  Robley  the  plain- 
tiff' no  doubt  did  sue  as  the  indorsee  of  Hodgson,  the  payee,  so  that  he 
had  apparently  a  regular  title  to  the  bill.  But  this  plaintiff  declares,  not 
as  the  indorsee  of  Rives,  but  upon  the  indorsement  of  Peebles,  Hall 
&  Co.,  which  is  certainly  bad.  No  person  can  acquire  a  title  to  a  bill, 
payable  to  the  order  of  Rives,  but  by  the  order  of  Rives.  When  he 
gave  it  back  to  Peebles,  Hall  &  Co.,  without  his  indorsement,  it  was 
dead  to  all  intents  and  purposes  as  a  negotiable  instrument.  In  the 
words  of  Mr.  Justice  Le  Blanc,  "Striking  out  the  payee's  indorsement, 
the  bill  could  not  possibly  be  negotiated."  The  indorsement  to  the 
plaintiff  was  a  nullity,  and  he  cannot  maintain  any  action  on  the  bills. 
New  trial  awarded,  / 


200  DEFENSES 


LEASK  et  al.  v.  DEW. 

^Supreme  Court,  Appellate  Division,  First  Department,  New  York,  1905.     102 

App.  Div.  529,  92  N.  Y.  Supp.  891.) 

This  action  was  brought  to  recover  upon  a  promissory  note  given 
by  the  defendaiU  to  the  plaii.itiffs'  testator.  The  note  was  dated  No- 
vember 23,  1901,  whereby  the  defendant  promised  to  pay  to  the  order 
of  Oliver  W,  Buckingham,  the  testaior,  one  year  after  date,  the  sum 
of  $5,000,  with  interest  at  6  per  cent.  Oliver  W."'Buckingham  died 
testate  on  the  31st  day  of  October,  1903,  and  upon  the  probate  of  his 
will  the  plaintiffs  duly  qualified  as  his  executors.  The  answer  averred, 
for  separate  and  affirmative  defenses,  that  the  testator  had  canceled 
the  said  note  by  an  instrument  in  writing.  Upon  the  trial  of  this  action 
the  plaintiff's  proved  the  making  of  the  note,  the  nonpayment  of  which 
was  admitted,  except  as  stated  in  the  answer,  and  rested.  The  defend- 
ant then  oft'ered  proof  that  after  testator's  death  the  note  in  question 
was  found  among  his  papers,  inclosed  in  an  envelope  together  with 
the  following  paper,  all  in  the  handwriting  of  the  testator,  except  the 
signature  of  the  witness : 

"New  York,  Nov.  25,  1901. 

"To  My  Executors — Gentlemen:  The  enclosed  note  I  wish  to  be 
canceled  in  case  of  my  death,  and  if  the  law  does  not  allow  it  I  wish 
you  to  notify  my  heirs  that  it  is  my  wish  and  orders. 

"Truly  yours,  Oliver  W.  Buckingham. 

"Witness  :   Frank  W.  Woglom." 

Judgment  for  plaintiffs.    Defendant  appeals.^** 

Hatch,  j,  *  *  *  This  brings  us  to  the  main  question  in  the 
case — the  construction  of  the  written  declaration  of  the  testator,  which 
was  found"  in  the  envelope  which  contained  the  note  after  his  death. 
It  is  probably  true  that  this  declaration  was  sufficient  to  discharge  de- 
fendant's obligation  upon  the  promissory  note,  within  the  authority 
of  Wekett  v.  Raby,  2  Brown's  House  of  Lords  Rep.  386.  The  decla- 
ration therein  was  made  a  few  days  before  the  death  of  the  testator, 
in  these  words :  "I  have  Raby's  bond,  which  I  keep.  I  don't  deliver  it 
up,  for  I  may  live  to  want  it  more  than  he;  but  when  I  die  he  shall 
have  it,  he  should  not  be  asked  or  troubled  for  it." 

Suit  having  been  brought  upon  the  bond,  it  was  ordered  to  be  de- 
livered up  and  canceled,  and  such  decision  was  affirmed  by  the  House 
of  Lords  upon  appeal.  The  declaration  in  the  present  case  is,  in  one 
view,  stronger  than  the  declaration  in  that  case,  for  therein  there  was 
the  express  intention  of  the  testator  to  keep  the  bond  as  a  subsisting 
obligation  against  Raby,  and  it  was  not  to  be  enforced  save  in  the 
event  of  his  death,  when  it  was  to  take  effect.  In  the  writing  under 
consideration  in  this  case  there  is  no  such  expression  in  terms.     A 


10  The  statement  is  abridged,  and  part  of  the  opinion  omitted. 


DISCHAKGE  201 

similar  doctrine  was  announced  in  Brinckerhoff  v.  Lawrence,  2  Sandf. 
Ch.  412.  Therein  the  Raby  Case  is  cited  with  approval.  The  declara- 
tion therein  was,  like  the  present,  limited  in  its  operative  force  to 
events  which  might  happen  subsequently  to  the  death  of  the  declarant. 
These  cases  applied  the  common-law  rule,  and,  while  they  are  author- 
itative declarations  of  the  effect  of  this  instrument  at  common  law, 
they  are  not  controlling  in  its  construction  at  the  present  time,  for 
the  reason  that  the  force  and  effect  of  an  instrument  of  renunciation 
is  now  governed  by  the  provisions  of  section  203  of  the  negotiable  in- 
struments law  (Laws  1897,  p.  744,  c.  612).  It  reads:  "The  holder 
may  expressly  renounce  his  rights  against  any  party  to  the  instrument 
before,  at  or  after  its  maturity.  An  absolute  and  unconditional  renun- 
ciation of  his  rights  against  the  principal  debtor  made  at  or  after  the 
maturity  of  the  instrument,  discharges  the  instrument.  But  a  renuncia- 
tion does  not  affect  the  rights  of  a  holder  in  due  course  without  notice. 
A  renunciation  must  be  in  writing  unless  the  instrument  is  delivered 
up  to  the  person  primarily  liable  thereon." 

This  statute  was  taken  from  an  act  passed  by  the  British  Parliament 
in  1882,  known  as  the  "Bills  of  Exchange  Act."  It  has  been  quite 
generally  adopted  in  various  states  of  the  American  Union.  Its  provi- 
sions are  as  follows:  "(1)  When  the  holder  of  a  bill  at  or  after  its 
maturity  absolutely  and  unconditionally  renounces  his  rights  against 
the~acceptor,  the  bill  is  discharged.  The  renunciation  must  be  in  writ- 
ing", unless  the  bill  is  delivered  up  to  the  acceptor.  (2)  The  liabilities  of 
any  party  to  a  bill  may  in  like  manner  be  renounced  by  the  holder  be- 
fore, at,  or  after  its  maturity,  but  nothing  in  this  section  shall  affect 
the  rights  of  a  holder  in  due  course  without  notice  of  the  renunciation." 

It  is  readily  seen  that  these  two  statutes,  in  character  and  import, 
are  alike.  The  only  dift'erence  is  change  in  the  form  of  phraseology, 
but  it  aft'ects  neither  the  sense  nor  the  constrifction.  A  single  case 
has  arisen  in  England  under  the  provisions  of  this  statute.  In  re 
George,  L.  R.  44  Ch.  Div.  627,  decided  in  1890.  Therein  it  appeared 
that  the  testator  desired  to  have  destroyed  a  note  for  i2,000.  given  by 
Mrs.  Francis.  Search  was  made  for  the  same,  that  it  might  be  de- 
stroyed, but  it  could  not  be  found.  At  the  instance  of  the  decedent, 
the  nurse  in  attendance  upon  him  wrote  at  his  dictation :  "30th  Au- 
gust, 1889.  It  is  by  Mr.  George's  dying  wish  that  the  check  [sic]  for 
£2,000.  money  lent  to  Mrs.  Francis  be  destroyed  as  soon  as  found." 
The  nurse  added  to  this  declaration  the  words:  "Mr.  George  is  per- 
fectly conscious  and  in  his  sound  mind.  [Signed]  Nurse  T."  This 
transaction  took  place  two  or  three  hours  before  death.  The  testator 
therein  left  a  will,  in  which  he  bequeathed  to  Mrs.  Francis,  his  niece, 
the  sum  of  £6,000.  The  executors  of  the  will  declined  to  pay  the  be- 
quest in  full,  and  thereupon  the  legatee  brought  an  action  to  determine 
the  question  as  to  whether  the  promissory  note  had  been  duly  canceled. 
The  court,  under  the  provisions  of  the  statute  above  quoted,  determined 
that  the  renunciation  was  insufficient  to  discharge  the  note.     Upon 


202  DEFENSES 

the  case  there  presented,  I  should  be  disposed  to  hold  that  it  amounted, 
within  the  terms  of  the  act,  to  an  unconditional  renunciation  of  the 
rights  of  the  testator  against  the  maker  of  the  note.  The  expression 
that  it  was  the  testator's  wish  that  it  be  destroyed  would  seem  to  consti- 
tute an  announced  declaration  to  destroy  the  instrument,  and,  as  such, 
it  was  a  clear  expression  of  a  renunciation  of  his  right  to  enforce  it.  In 
the  declaration  of  renunciation,  it  is  stronger  than  the  instrument  re- 
lied upon  in  the  present  case. 

There  is  some  obscurity  in  the  provisions  of  our  statute.  In  its  first 
sentence  it  provides  for  the  renunciation  of  the  rights  of  the  holder 
against  any  party  to  the  instrument  which  may  be  made  before,  at,  or 
after  its  maturity.  In  the  second  sentence  it  provides  for  an  absolute 
and  unconditional  renunciation  of  the  rights  of  the  holder  against  the 
principal  debtor  at  or  after  the  maturity  of  the  instrument,  and  dis- 
charges the  instrument.  The  first  relates  to  the  party ;  the  second,  to 
the  instrument.  It  is  somewhat  difficult  to  see  how  there  could  be  an 
absolute  discharge  of  a  party  to  an  instrument  without  discharging  the 
instrument  as  an  obligation,  so  far  as  he  is  concerned.  We  do  not 
clearly  perceive  why  this  distinction  should  have  been  made.  It  is  im- 
material, however,  to  the  rights  of  the  parties  to  the  present  action. 
The  instrument  of  renunciation  contains  no  express  declaration  of  the^ 
testator  to  renounce  his  rights  in'the  note  against  the  party,  or  of  his 
right  to  enforce  it  as  a  subsisting  obligation.^  The  expression  is :  "I 
wish  [the  note]  to  be  canceled  in  case  of  my  death."  There  is  nothing 
in  these  words  which  can  be  construed  as  expressing  a  renunciation  of 
any  rights  either  against  the  party  or  upon  the  instrument.  Had  it 
been  delivered  to  the  defendant  during  the  lifetime  of  the  testator,  it 
would  not  have  precluded  the  latter  at  any  time  upon  maturity  from 
enforcing  the  note.  There  is  nothing  indicating  an  intent  upon  his 
part  not  to  enforce  it' during  his  lifetime.  There  was  no  delivery  of 
it  to  anybody,  and  while,  doubtless,  it  was  sufficiently  authenticated  to 
accomplish  a  renunciation,  it  had  no  operative  effect  whatever,  as  it 
did  not  fall  within  the  statute  or  comply  with  its  terms. 

In  principle,  the  question  raised  by  this  case  has  been  decided  by  this 
court.  Dimon  v.  Keery,  54  App.  Div.  318,  66  N.  Y.  Supp.  817.  There- 
in the  plaintiff's  intestate  loaned  to  the  defendant  a  sum  of  money, 
taking  her  promissory  note  in  writing,  wherein  she  agreed  to  pay  the 
same,  with  interest,  on  demand.  At  the  time  the  note  was  delivered, 
the  testator  indorsed  thereon  the  words :  "At  my  death  the  above  note 
becomes  null  and  void.  Stephen  C.  Dimon."  Dimon  continued  to  re- 
tain possession  of  the  note,  and  the  defendant  paid  interest  thereon,  but 
no  principal.  Dimon  died  about  three  years  after  the  execution  and 
delivery  of  the  note.  In  an  action  to  enforce  the  same  by  his  admin- 
istrator, the  'defendant  was  held  liable  thereon,  as  the  indorsement  was 
a  mere  declaration  by  the  payee  of  the  note  as  to  his  intention  concern- 
ing it,  but  that  it  was  insufficient  as  constituting  either  a  gift  of  money, 
or  an  agreement  to  discharge  it  as  an  obligation.    The  court  therein  did 


DISCHARGE  203 

not  discuss  the  statute  which  is  here  the  subject  of  consideration.  It 
is  manifest,  however,  that  the  declaration  indorsed  upon  the  note  was 
not  a  renunciation  of  the  habihty  of  the  maker  during  the  hfetime  of 
the  deceased,  or  of  any  renunciation  of  the  obhgation  of  the  instru- 
ment; and,  as  it  did  not  constitue  a  gift  or  an  agreement,  it  neither 
fell  within  the  terms  of  the  statute,  nor  exempted  the  defendant,  for 
either  reason,  from  liability  thereon. 

In  the  instrument  relied  upon  in  this  case,  so  far  as  the  direction  for 
cancellation  in  the  event  of  death,  and  a  command  to  his  heirs  to  obey 
his  wish  and  follow  his  orders,  the  language  is  no  stronger  than  the  in- 
dorsement upon  the  back  of  the  note  in  the  Dimon  Case.  Nor  is  it  as 
strong,  because  the  language  there  used  was  a  declaration  that  the  note 
at  death  "becomes  null  and  void."  Here  there  is  simply  the  expression 
of  a  wish  to  have  it  canceled,  and  a  direction  to  the  heirs  to  obey  the 
wish.  Consequently  the  Dimon  Case  becomes  a  direct  and  controlling 
authority  in  the  disposition  of  this  controversy.  As  there  was  no 
yalid  renunciation  of  right  of  the  testator  to  enforce  the  note  against 
the_2ai:ty,  or  of  renunciation  from  liability  upon  the  instrument,  and  as 
nothing  contained  in  the  declaration  otherwise  operates  to  relieve  the 
.defendant  from  liability,  it  follows  that  the  note  remains  a  valid  and 
subsisting  obligation. 

The  judgment  enforcing  it  should  therefore  be  affirmed,  with  costs. 


INGHAM  V.  PRIMROSE. 
(Court  of  Common  Pleas,  1859.     7  C.  B.  [N.  S.]  82.) 

This  was  an  action  upon  a  bill  of  exchange  drawn  by  one  Charles 
Murgatroyd  upon  and  accepted  by  the  defendant,  and  indorsed  by 
Murgatroyd  to  one  King,  and  by  King  to  the  plaintiff.     *     *     * 

The  cause  was  tried  before  Cockburn,  C.  J.,  at  the  sittings  in  Lon- 
don after  Hilary  term,  1858.  The  facts  which  appeared  in  evidence 
were  as  follows:  The  defendant  accepted  the  bill  declared  on,  and 
gave  it  to  Charles  Murgatroyd  for  the  purpose  of  procuring  it  to  be 
discounted  for  his  use.  Murgatroyd  tried,  but  in  vain,  to_get  the  bill 
discounted,  and^ returned  it  to  the  defendant,  who  in  !\Iurgatroyd's 
presence  lore  the  [laper  in  half  and  threw  it  away  in  the  street.  ■\Iur- 
glitroyd  picked  up  the  bill,  observing  that  it  was  better  not  to  throw 
•it  down  in  the  street;  whereupon  the  defendant  said  nothing.  Mur- 
gatroyd afterwards  pasted  together  the  two  pieces  of  paper,  and  passed 
the  bill  away  to  one  King,  who  afterwards  indorsed  it  to  the  plaintiff. 
'Tbic  jury  found  that  the  defend_ant  when  he  torethe  bill  in  half  and 
threw  it  away  intended  to  cancel  it;  that  King  bona  fide  gave  il5.  for 
the  bill ;  but  that  the  transaction  between  King  and  the  plaintiff  was 
not  bona  fide. 


204  DEFENSES 

The  learned  judge  thereupon  directed  a  verdict  to  be  entered  for 
the  defendant,  but  gave  the  plaintiff  leave  to  move  to  enter  the  ver- 
dict for  him,  the  court  to  be  at  liberty  to  draw  inferences  of  fact. 

Cross,  in  Easter  term,  1858,  accordingly  obtained  a  rule  nisi.^'- 

Williams,  J.,  now  delivered  the  judgment  of  the  court. 

This  case  was  argued  before  the  late  Lord  Chief  Justice,  my  Broth- 
ers WiLLES  and  BylES,  and  myself.  We  are  of  opinion  that  the  plain- 
_tiffjs  enti^tkd  to  judgment.  It  is,  we  thinfT,  settled  law  "that,  if  the  de- 
fendant had  drawn  a  check,  and,  before  he  had  issued  it,  he  had  lost  it, 
or  it  had  been  stolen  from  him,  and  it  had  afterwards  found  its  way 
into  the  hands  of  a  holder  for  value  without  notice,  who  had  sued 
the  defendant  upon  it,  he  would  have  had  no  answer  to  the  action.  So, 
if  he  had  indorsed  in  blank  a  bill  payable  to  his  order,  and  it  been  lost 
or  stolen  before  he  delivered  it  to  any  one  as  indorsee.  See  the  judg- 
ment in  ]\Iarston  v.  Allen,  8  M.  &  W.  504.  The  reason  is  that  such 
negotiable  instruments  have,  by  the  law  merchant,  become  part  of  the 
mercantile  currency  of  the  country;  and,  in  order  that  this  may  not 
be  impeded,  it  is  requisite  that  innocent  holders  for  value  should  have 
a  right  to  enforce  payment  of  them  against  those  who  by  making  them 
have  caused  them  to  be  a  part  of  such  currency.  In  the  present  case, 
the  defendant  made  the  bill  in  question,  and  rendered  it  a  negotiable 
instrument,  and  then  tried  in  vain  to  get  it  discounted.  It  was  then  re- 
turned to  himj-and  was  intended  by  him  to  be  wholly  withdrawn  from 
circulation.  But  it  was,  notwithstanding,  again  put  into  circulation 
through  the  fraud  of  another  man,  and  reached  the  hands  of  the  plain- 
tiff, who  held  it  for  value,  without  any  notice  of  the  fraud. 

If  these  were  all  the  facts  of  the  case,  it  appears  to  be  impossible  to 
distinguish  it  in  any  material  point  from  the  cases  already  mentioned, 
of  liability  when  the  original  circulation  has  been  effected  by  fraud, 
without  the  consent  of  him  who  made  the  instrument. 

The  question,  then,  is  whether  such  liability  is  precluded  by  the  fact 
that,  before  the  instrument  was  put  into  circulation  for  the  second 
time,  the  defendant  had  torn  it,  with  the  intention  of  destroying  or  an- 
nulling it. 

If  an  act  done  with  such  an  intention  by  the  maker  of  a  negotiable 
instrument  does  not  manifest  the  intention  on  the  face  of  the  instru- 
ment, it  can  hardly  be  maintained  that  the  act  would  be  of  any  efficacy ; 
because  the  instrument  would  nevertheless  be  apparently  a  part  of  the 
mercantile  currency,  as,  for  instance,  if,  in  the  present  case,  the  de- 
fendant had  merely  crumpled  up  the  bill  in  his  hand  and  thrown  it 
away,  and  it  had  been  restored  to  its  original  appearance,  without  leav- 
ing any  trace  of  the  act  which  was  intended  to  annul  it.  But  if,  on  the 
other  hand,  the  act  be  such  that  the  paper  bears  on  the  face  of  it  the 
signs  of  something  having  been  done  to  it  which  is  characteristic  of  an 
intention  to  destroy  or  annul  it,  as  in  the  case  of  Scholey  v.  Ramsbot- 

11  The  statement  is  abridged,  and  the  arguments  of  counsel  omitted. 


DISCHARGE  20.J 

ton-!,  2  Campb.  485,  where  the  drawer  of  a  check  tore  it  into  four  pieces 
and  threw  it  from  him,  and  the  four  pieces  were  afterwards  neatly 
pasted  together  upon  another  sHp  of  paper,  but  the  rents  were  quite 
visible,  and  the  face  of  the  check  soiled  and  dirty,  no  holder  of  an 
instrument  in  such  a  condition  could  enforce  it,  because,  in  truth,  no 
man  of  ordinary  intelligence  and  caution  could  fairly  regard  it  as  part 
of  the  apparent  commercial  currency. 

The  case  before  us,  therefore,  appears  to  turn  on  the  question 
whether  the  act  of  tearing  the  bill  into  two  pieces,  being  manifest  on 
tlie  face  of  rt  _is"such  an  act  as  prima  facie  ought  to  have  indicated  to 
tlTe"piaintiff  that  it  had  been  withheld  or  withdrawn  from  circulation. 
As  we  understand  the  facts,  the  tearing  had  been  done  in  such  a  way 
that  the  appearance  of  the  bill  when  it  reached  the  plaintiff's  hands 
was  at  least  as  consistent  with  its  having  been  divided  into  two,  for 
the  purpose  of  safer  transmission  by  the  post,  as  with  its  having  been 
torn  for  the  purpose  of  annulling  it.  It  was,  properly,  a  question  for 
the  jury  whether  the  bill  exhibited  appearances  which  would  have  led 
a  man  of  ordinary  intelligence  to  the  conclusion  that  it  had  been  torn 
for  the  latter  purpose.  But  the  point  has  been  so  reserved  at  the  trial 
that  the  court  is  to  perform  the  function  of  the  jury  in  this  respect; 
and  we  cannot  find  enough  on  the  facts  of  the  case,  or  on  an  inspection 
of  the  bill  itself,  to  justify  us  in  coming  to  such  a  conclusion. 

But  it  is  argued,  on  the  part  of  the  defendant,  that  the  putting  to- 
gether of  the  two  halves  under  the  circumstances  amounted  to  for- 
gery, just  as  much  as  if  some  signature  which  he  had  written  for  a  dif- 
ferent purpose  had  been  taken  from  its  proper  place,  and  fraudulently 
attached  as  his  signature  to  the  bill. 

This  would  be  a  very  narrow  ground  of  decision,  inasmuch  as  it 
would  concede  that  the  bill  would  be  enforceable  if  the  tearing  had 
stopped  short  of  utterly  dividing  the  paper,  or  if  the  bill  had  come  to 
the  plaintiff's  hands  in  the  halves,  by  two  successive  posts,  with  an  in- 
timation that  it  was  so  sent  to  him  for  the  purpose  of  safer  transmis- 
sion. 

However,  it  seems  tous.that,  even  assuming  that  the  act  of  thus 
reconstructing  the  bill  constituted  a  forgery  (which  may  admit  of 
grave  doubt),  yet,  on  the  principle  of  the  decision  of  Young  v.  Grote, 
4  Bingh.  253,  12  J.  B.  Moore,  484,  this  would  be  no  answer  to  the 
claim  of  the  plaintiff,  because  the  defendant,  by  abstaining  from  an 
effectual  cancellation  or  destruction  of  the  bill,  has  led  to  the  plaintiff's 
becoming  the  holder  of  it  for  value,  and  without  having  any  just  cause 
for  supposing  that  it  had  been  canceled  or  annulled. 

The  rule  must  therefore  be  absolute  for  entering  a  verdict  for  the 
plaintiff  for  the  amount  of  the  bill  and  interest. 


206  PDRCHASEK  FOK   VALUE   WITHOUT  NOTICE 


PURCHASER  FOR  VALUE  WITHOUT  NOTICE 

I.  Valued 


BROOKLYN  CITY  &  N.  R.  CO.  v.  NATIONAL  BANK  OF  THE 

REPUBLIC. 

(Supreme  Court  of  United  States,  ISSO.     102  U.  S.  14,  2G  L.  Ed.  61.) 

Error  to  the  Circuit  Court  of  the  United  States  for  the  Southern 
District  of  New  York. 

This  was  an  action  by  the  National  Bank  of  the  RepubHc  of  New 
York  against  the  Brooklyn  City  &  Newtown  Railroad  Company,  as 
maker  of  a  promissory  note  for  $5,000,  which  had  been  made  by  the 
company  payable  to  one  of  its  officers  and  by  him  indorsed  and  deliv- 
ered to  Hutchinson  &  Ingersoll,  a  firm  of  note  brokers,  for  sale  for 
the  benefit  of  the  company.  Hutchinson  &  Ingersoll  without  authority 
pledged  the  note,  together  with  other  paper,  to  the  plaintiff  as  col- 
^atera^  security  for  the  repayment  of  a  cash  advance  of  $36,000  made 
by~  the"  plaintiff  to  them  on  June  19,  1873.  On  July  11,  1873,  the 
plaintiff  loaned  Hutchinson  &  Ingersoll  $10,000.  On  July  22,  1873, 
Hutchinson  &  Ingersoll  agreed  (antedating  the  agreement  to  June 
19th)  that  all  collateral  which  had  theretofore  been  deposited  with  the 
plaintiff",  including  the  $5,000  note,  should  be  held  by  the  plaintiff  as 
collateral  to  the  loan  of  July  11th,  and  any  other  loans  which  the  plain- 
tiff might  make.  Subsequently  the  $36,000  loan  was  paid,  but  $5,136.68 
remained  due  on  the  $10,000  loan,  and  the  plaintiff  claims  to  be  a  holder 
for  value  by  virtue  of  his  position  as  pledgee  of  the  $5,000  note  as 
security  for  this  balance  of  $5,136.68.  The  plaintiff  had  no  knowledge 
of  the  breach  of  trust  by  Hutchinson  &  Ingersoll  in  pledging  the  note.^ 

Mr.  Justice  Harlan.  *  *  *  The  next  proposition^  involves  , the 
right  of  the  railroad  company  to  show  as  against  the  bank,  that  the  note 
was  executed  and  delivered  to  Hutchinson  &  Ingersoll  for  the  purpose 
only  of  raising  money  upon  it  for  the  company,  and  that,  consequently, 
they  had  no  authority  to  pledge  it  as  collateral  security  for  their  own 
indebtedness  to  the  bank.  It  will  have  been  observed,  from  the  state- 
ment of  facts,  that  the  note  in  suit  was  among  those  pledged  to  the 
bank  as  security  for  the  call  loan  of  $36,000,  made  June  19,  1873 ;  that 
Howes,  Hyatt  &  Co.,  whose  notes  had  been  pledged  as  security  for  the 

1  For  discussions  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
123,  124. 

2  The  statement  of  facts  is  written  by  the  editors.  The  arguments  of  coun- 
sel, part  of  the  opinion  of  Harlan,  J.,  and  the  concurring  opinion  of  Clifford, 
J.,  are  omitted.     Miller  and  Field,  JJ.,  dissented. 


VALUE 


201 


call  loan  of  $10,000,  made  June  19,='  1873,  having  become  insolvent, 
Hutchinson  &  Ingersoll,  July  22,  1873,  at  the  request  of  the  bank,  ex- 
ecuted the  writing,  dated  June  19,  1873,  whereby  they  pledged  all  se- 
curities, bonds,  stocks,  things  in  action,  or  other  property  theretofore 
deposited  with  the  bank,  whether  specifically  or  not,  as  security  for  the 
payment  of  any  and  every  indebtedness,  liability,  or  engagement  held 
by  the  bank,  for  which  they  were,  or  should  become  in  any  way  lia- 
ble. Although,  therefore,  the  call  loan  of  $36,000  was  extinguished, 
without  resorting  to  the  note  in  suit,  that  note,  under  the  agreement 
made  July  22,  1873,  stood  pledged  as  collateral  security,  also,  for  the 
$10,000  call  loan  of  July  11,  1873. 

The  bank,  we  have  seen,  received  the  note,  before  jts^jnaturity,  in- 
flnr<;pH   in   blnnk^   without  any  e;vpress   a-recincnt  to  give  time,   but 
withoufnotice  tli:il  it  was  other  than  ordinary  business  paper,  or  that 
there  was  any  (lLl\ii>c  tlicicLu,  and  in  ignorance  of  the  purposes  for 
which  it  had  been  executed  and  delivered  to  Hutchinson  &  Ingersoll. 
Did  the-baTil^.Uiider  these  circumstances,  become  a.  holder  for  value, 
and  as  such  entitled,  according  tu  the  recognized  principles  of  com- 
mercial law,  to  be  protected  against  the  equities  or  defenses  which 
the  railroad  company  may  have  against  the  other  parties  to  the  note  ? 
'     ThTs~question  was  carefully  considered,  though,  perhaps,  it  was  not 
absolutely  necessary  to  be  determined,  in  Swift  v.  Tyson,  16  Pet.  1, 
10  L.  Ed.  865.    After  stating  that  the  law  respecting  negotiable  instru- 
ments was  not  the  law  of  a  single  country  only,  but  of  the  commercial 
world,  the  court,  speaking  by  Mr.  Justice  Story,  said:   "And  we  have 
no  hesitation  in  saying  that  a  pre-existing_debt  does  constitute  a  valu- 
able consideration  in  the  sense  of  the  general  rule  already  ^staled  a- 
applicable  to  ne-ntiaMe  instruments.     A.-suming  it  to  be  true  (which, 
however,  may  well  admit  of  some  doubt  from  the  generality  of  the 
language)   that   the   holder   of   a   negotiable  instrument   is  unaffected 
with  the  equities  between  antecedent  parties,  of  which  he  has  no  no- 
tice, only  where  he  receives  it  in  the  usual  course  of  trade  and  business 
for  a  valuable  consideration,  before  it  becomes  due,  we  are  prepared  to 
say  that  receiving  it  in  payment  of  or  as  security  for  a  pre-existing  debt 
is  according  to  the  known  usual  course  of  trade  and  business.     And- 
why,  upon  principle,"  continued  the  court,  "should  not  a  pre-existing 
debt  be  deemed  such  a  valuable  consideration?     It  is  for  the  benefit 
anH^inTnvenience  of  the  commercial  world  to  give  as  wide  an  extent 
as  practicable  to  the  credit  and  circulation  of  negotiable  paper,  that  it 
may  pass  not  only  as  security  for  new  purchases  and  advances,  made 
upon  the  transfer  thereof,  but  also  in  payment  of  and  as  security  for 
pre-existing  debts.     The  creditor  is  thereby  enabled  to  realize  or  to 
secure  his  debt,  and  thus  may  safely  gave  a  prolonged  credit,  or  for- 
bear from  taking  any  legal  steps  to  enforce  his  rights.     The  debtor, 
also,  has  the  advantage  of  making  his  negotiable  securities  of  equiva- 

3  Obviously  this  shoiild  be  July  11. 


203  PURCHASER   FOR    VALUE    WITHOUT   NOTICE 

lent  value  to  cash.  But  establish  the  opposite  conclusion,  that  nego- 
tiable paper  cannot  be  applied  in  payment  of  or  as  security  for  pre- 
existing debts,  without  letting  in  all  the  equities  between  the  original 
and  antecedent  parties,  and  the  value  and  circulation  of  such  securi- 
ties must  be  essentially  diminished,  and  the  debtor  driven  to  the  em- 
barrassment of  making  a  sale  thereof,  often  at  a  ruinous  discount,  to 
some  third  person,  and  then  by  circuity  to  apply  the  proceeds  to  the 
payment  of  his  debts.  What,  indeed,  upon  such  a  doctrine,  would 
become  of  that  large  class  of  cases  where  new  notes  are  given  by  the 
same  or  by  other  parties,  by  way  of  renewal  or  security  to  banks,  in 
lieu  of  old  securities  discounted  by  them  which  have  arrived  at  ma- 
turity? Probably  more  than  one-half  of  all  bank  transactions  in  our 
country,  as  well  as  those  of  other  countries,  are  of  this  nature.  The 
doctrine  would  strike  a  fatal  blow  at  all  discounts  of  negotiable  securi- 
ties for  pre-existing  debts." 

After  a  review  of  the  English  cases,  the  court  proceeded:  "They 
directly  establish  that  a  bona  fide  holder,  taking  a  negotiable  note  in 
payment  of  or  as  security  for  a  pre-existing  debt,  is  a  holder  for  a 
valuable  consideration,  entitled  to  protection-  against  all  the  equities 
between  the  antecedent  parties," 

The  opinion  in  that  case  has  been  the  subject  of  criticism  in  some 
courts,  because  it  seemed  to  go  beyond  the  precise  point  necessary  to  be 
decided,  when  declaring  that  the  bona  fide  holder  of  a  negotiable  note, 
takeji  as  ^collateral  security  for  "an  antecedent  debt,  was  protected 
against  equities  existing  between  the  original  or  antecedent  parties. 
The  brief  dissent  of  Mr.  Justice  Catron  was  solely  upon  that  ground, 
which  renders  it  quite  certain  that  the  whole  court  was  aware  of  the 
extent  to  which  the  opinion  carried  the  doctrines  of  the  commercial 
law  upon  the  subject  of  negotiable  instruments  transferred  or  deliv- 
ered as  security  for  antecedent  indebtedness.  In  the  judgment  of 
this  court,  as  then  constituted  (Mr.  Justice  Catron  alone  excepted),  the 
holder  of  a  negotiable  instrument,  received  before  maturity,  and  with- 
out notice  of  any  defense  thereto,  is  unaffected  by  the  equities  or  de- 
fenses of  antecedent  parties,  equally  whether  the  note  is  taken  as 
collateral  security  for  or  in  payment  of  previous  indebtedness.  And 
we  understand  the  case  of  McCarty  v.  Roots,  21  How.  432,  16  L.  Ed. 
162,  to  affirm  Swift  v.  Tyson,  upon  the  point  now  under  consideration. 
It  was  there  said :  "Nor  does  the  fact  that  the  bills  were  assigned  to 
the  plaintiff  as  collateral  security  for  a  pre-existing  debt  impair  the 
plaintiff's  right  to  recover."  21  How.  438  (16  L.  Ed.  162).  "The  de- 
livery of  the  bills  to  the  plaintiff  as  collateral  security  for  a  pre-ex- 
isting debt,  under  the  decision  of  Swift  v.  Tyson,  was  legal."  21 
How.  439  (16  h.  Ed.  162). 

It  may  be  remarked  in  this  connection  that  the  courts  holding  a 
different  rule  have  uniformly  referred  to  an  opinion  of  Chancellor 
Kent  in  Bay  v.  Coddington,  5  Johns.  Ch.  (N.  Y.)  54,  9  Am.  Dec.  268, 
reafiirmed  in  Coddington  v.  Bay,  20  Johns.  (N.  Y.)  637,  11  Am.  Dec. 


VALUE  209 

342.  There  is,  however,  some  reason  to  believe  that  the  views  of  that 
eminent  jurist  were  subsequently  modified.  In  the  later  editions  of 
his  Commentaries  (volume  3,  p.  81,  note  b),  prepared  by  himself,  refer- 
ence is  made  to  Stalker  v.  McDonald,  6  Hill  (N.  Y.)  93,  40  Am.  Dec. 
389,  in  which  the  principles  asserted  in  Bay  v.  Coddington  were  re- 
examined and  maintained  in  an  elaborate  opinion  by  Chancellor  Wal- 
worth, who  took  occasion  to  say  that  the  opinion  in  Swift  v.  Tyson  was 
not  correct  in  declaring  that  a  pre-existing  debt  was,  of  itself,  and 
without  other  circumstances,  a  sufficient  consideration  to  entitle  the 
bona  fide  holder,  without  notice,  to  recover  on  the  note,  when  it  might 
not,  as  between  the  original  parties,  be  valid.  But  Chancellor  Kent 
adds:  "Mr.  Justice  Story,  on  Promissory  Notes  (page  215,  note  1), 
repeats  and  sustains  the  decision  in  Swift  v.  Tyson,  and  I  am  inclined 
to  concur  in  that  decision  as  the  plainer  and  better  doctrine."  Of 
course  it  did  not  escape  his  attention  that  the  court  in  Swift  v.  Tyson 
declared  the  equities  of  prior  parties  to  be  shut  out  as  well  when 
the  note  was  merely  pledged  as  collateral  security  for  a  pre-existing 
debt  as  when  transferred  in  payment  or  extinguishment  of  such  debt. 

According  to  the  very  general  concurrence  of  judicial  authority  in 
this  country  as  well  as  elsewhere,  it  may  be  regarded  as  settled  in  com- 
mercial jurisprudence — there  being  no  statutory  regulations  to  the  con- 
trary— that  wlierc-negotiable  paper  is,  received  in  payment  of  an  ante- 
_cedent  debt,  or  where  it  is  transferred  by  indorsement,  as  collateral 
security  for  a  debt  created,  or  a  purchase  made,  at  the  time  of  transfer, 
01  the  transfer  is  to  secure  a  debt,  not  due,  under  an  _agreement  ex- 
£ress_or  to  be  clearly  implied  jrpm  the  circumstances,  that  the  collec- 
tion of  tlie  principal  debt  is  to  be  postponed  or  delayed  until  the  collat- 
eral matured,  or  where  time  is  agreed  to  be  given  and  is  actually 
given  upon  a  debt  overdue,  in  consideration  of  the  transfer  of  nego- 
tiable paper  as  collateral  security  therefor,  or  where  the  transferred 
note  takes  the  place  of  other  paper  previously  pledged  as  collateral 
security  for  a  debt,  either  at  the  time  such  debt  was  contracted  or  be- 
fore it  became  due — in  each  of  these  cases  the  holder  who  takes  the 
transferred  paper,  before  its  maturity,  and  without  notice,  actual  or 
otherwise,  of  any  defense  thereto,  is  held  to.  .have  received  it  in  due 
course  of  business,  and^  in  the  sense  of  the  commercial  law,  becomes  a 
holder  for  value,  entitled  to  enforce  payment,  without  regard  to  any 
equity  or  defense  which  exists  between  prior  parties  to  such  paper. 

Upon  these  propositions  there  seems  at  this  day  to  be  no  substantial 
conflict  of  authority.  But  there  is  such  conflict  w^here  the  note  is 
transferred  as  collateral  security  merely,  without  other  circumstances, 
for  a  debt  previously  created.  One  of  the  grounds  upon  which  some 
courts  of  high  authority  refuse,  in  such  cases,  to  apply  the  rule  an- 
nounced in  Swift  v.  Tyson,  is  that  transactions  of  that  kind  are  not 
in  the  usual  and  ordinary  course  of  commercial  dealings.  But  this 
Moore  Cases  B.&  N. — 14 


210  PURCHASER  FOR  VALUE   WITHOUT  NOTICE 

objection  is  not  sustained  by  the  recognized  usages  of  the  commercial 
world,  nor,  as  wc  think,  by  sound  reason.  The  transfer  of  negotiable 
paper  as  security  for  antecedent  debts  constitutes  a  material  and  an 
increasing  portion  of  the  commerce  of  the  country.  Such  transactions 
have  become  very  common  in  financial  circles.  They  have  grown  out 
of  the  necessities  of  business,  and,  in  these  days  of  great  commercial 
activity,  they  contribute  largely  to  the  benefit  and  convenience  both  of 
debtors  and  creditors.  Mr.  Parsons,  in  his  treatise  on  the  Law  of 
Promissory  Notes  and  Bills  of  Exchange,  discusses  the  general  ques- 
tion of  the  transfer  of  negotiable  paper  under  three  aspects — one, 
where  the  paper  is  received  as  collateral  security  for  antecedent  debts. 
We  concur  with  the  author  "that,  when  the  principles  of  the  law  mer- 
chant have  established  more  firmly  and  unreservedly  their  control  and 
their  protection  over  the  instruments  of  the  merchant,  all  of  these 
transfers  (not  afi:ected  by  peculiar  circumstances)  will  be  held  to  be 
regular,  and  to  rest  upon  a  valid  consideration."  1  Parsons,  Notes  and 
Bills  (2d  Ed.)  218. 

Another  ground  upon  which  some  courts  have  declined  to  sanction 
the  rule  announced  in  Swift  v.  Tyson  is  that  upon  the  transfer  of 
negotiable  paper  merely  as  collateral  security  for  an  antecedent  debt 
nothing  is  surrendered  by  the  indorsee — that  to  permit  the  equities  be- 
tween prior  parties  to  prevail  deprives  him  of  no  right  or  advantage 
enjoyed  at  the  time  of  transfer,  imposes  upon  him  no  additional  bur- 
dens, and  subjects  him  to  no  additional  inconveniences. 

This  may  be  true  in  some,  but  .it  is  not  true  in  most,  cases,  nor,  in 
our  opinion,  is  it  ever  true  when  the  note,  upon  its  delivery  to  the 
transferee,  is  in  such  form  as  to  make  him  a  party  to  the  instrument, 
and  impose  upon  him  the  duties  which,  according  to  the  commercial 
law,  must  be  discharged  by  the  holder  of  negotiable  paper  in  order  to 
fix  liability  upon  the  indorser. 

The_bank  did. not  take  the  note  in  suit  as  a  mere  agent -to  receive  the 
amount  due  wlien  it  suited  the  convenience  of  the  debtor  to  make  pay- 
_^nt.  It  received, the. note  under  an  obligation,  imposed  by  the  com- 
mercial  law,  to  present  it  for  payment,  and  give  notice  of  nonpayment, 
in  the  mode  prescribed  by  the  settled  rules  of  that  law.  We  are  of 
opinion  that  the  undertaking  of  the  bank  to  fix  the  liability  of  prior 
parties,  by  due  presentation  for  payment  and  due  notice  in  case  of 
nonpayment — an  undertaking  necessarily  implied  by  becoming  a  party 
to  the  instrument — was  a  sufficient  consideration  to  protect  it  against 
equities  existing  between  the  other  parties,  of  which  it  had  no  notice. 
It  assumed  the  duties  and  responsibilities  of  a  holder  for  value,  and 
should  have  the  rights  and  privileges  pertaining  to  that  position.  The 
correctness  of  this  rule  is  apparent  in  cases  like  the  one  now  before  us. 
The  note  in  suit  was  negotiable  in  form,  and  was  delivered  by  the 
maker  for  the  purpose  of  being  negotiated.  Had  it  been  regularly  dis- 
counted by  the  bank,  at  any  time  before  maturity,  and  the  proceeds 


VALUE 


211 


either  placed  to  the  credit  of  Hutchinson  &  Ingersoll,  or  apphed  di- 
rectly to  the  discharge,  pro  tanto,  of  any  one  of  the  call  loans  previ- 
ously made  to  them,  it  would  not  be  doubted  that  the  bank  would  be 
protected  against  the  equities  of  prior  parties.  Instead  of  procuring  its 
formal  discount,  Hutchinson  &  Ingersoll  used  it  to  secure  the  ultimate 
payment  of  their  own  debt  to  the  bank.  At  the  time  the  written  agree- 
ment of  July  22,  1873,  was  executed,  by  which  this  note,  with  others, 
was  pledged  as  security  for  any  debt  then  or  thereafter  held  against 
them,  the  bank  had  the  right  to  call  in  the  $10,000  loan ;  that  is,  to 
require  immediate  payment.  The  securities  upon  which  that  loan 
rested  had  become,  in  part,  worthless,  and  it  is  evident  that  but  for  the 
deposit  of  additional  collateral  securities  the  bank  would  have  called 
in  the  loan,  or  resorted  to  its  rightful  legal  remedies  for  the  enforce- 
ment of  payment.  It  was,  under  the  circumstances,  the  duty  of  the 
debtors  to  make  such  payment,  or  to  secure  the  debt.  It  was  important 
to  them,  and  was  in  the  usual  course  of  commercial  transactions,  to 
furnish  such  security.  If  the  bank  was  deceived  as  to  the  real  owner- 
ship of  the  paper,  or  as  to  the  purposes  of  its  execution  and  delivery 
to  Hutchinson  &  Ingersoll,  it  was  because  the  railroad  company  in- 
trusted it  to  those  parties  in  a  form  which  indicated  that  the  latter 
were  its  rightful  holders  and  owners,  with  absolute  power  to  dispose 
of  it  for  any  purpose  they  saw  proper. 

Our  conclusion,  therefore,  is  that  the  transfer,  before  maturity,  of 
negoHable  pripcr,  a-^  -ciurity  for  an  antecedent  debt  merely,  without 
other  circutiistances,  if.Jhe  paper  be  so  indorsed  that  tlie  holder  be- 
comes a  part}-  to  tlie  instrument,  although  the  transfer  is  without 
Express  agreement  by  the  creditor  for  indulgence,  is  not  an  improper 
use  of  such  paper,  and  is  as  much  in  the  usual  course  of  commercial 
busmess  as  its  iran-fcr  in  iia}-nient  nf  -uch  debt.  '  In  either  case,  the 
"oona  fhlc  lidliUr  is  unaffectc<l  by  equities  or  defenses  between  prior 
parties,  of  which  he  had  no  notice.  This  conclusion  is  abundantly  sus- 
ta^ined  by  authority.  A  different  determination  by  this  court  would,  we 
apprehend,  greatly  surprise  both  the  legal  profession  and  the  comjiner- 
cial  world.  See  Bigelow's  Bills  and  Notes,  502  et  seq. ;  1  Daniel,  Neg. 
Inst.  (2d  Ed.)  c.  25,  §§  820-833 ;  Story,  Promissory  Notes  (7th  Ed.  by 
Thorndyke)  §§  186,  195;  1  Parsons,  Notes  and  Bills  (2d  Ed.)  218.  c. 
6,  §  4;  and  Redfield  &  Bigelow's  Leading  Cases  upon  Bills  of  Ex- 
change and  Promissory  Notes,  where  the  authorities  are  cited  by  the 
autliors.     *     *     * 

Mr.  Justice  Bradley.  I  concur  in  the  judgment  rendered  in  this 
case,  and  in  most  of  the  reasons  given  in  the  opinion.  But,  in  refer- 
ence to  the  consideration  of  the  transfer  of  the  note  as  collateral  se- 
curity, I  do  not  regard  the  obligation  assumed  by  the  indorsee  (the 
bank),  to  present  the  note  for  payment  and  give  notice  of  nonpayment, 
as  the  only,  or  the  principal,  consideration  of  such  transfer.  The  true 
consideration  was  the  debt  due  from  the  indorsers  to  the  indorsee,  and 


212  PURCHASER   FOR   VALUE   WITHOUT  NOTICE 

tlie  obligation  to  pay  or  secure  said  debt.  Had  any  other  collateral 
security  been  given,  as  a  mortgage,  or  a  pledge  of  property,  it  would 
have  been  equally  sustained  by  the  consideration  referred  to,  namely, 
the  debt  and  the  obligation  to  pay  it  or  to  secure  its  payment.  If  the 
indorsers  had  assigned  a  mortgage  for  that  purpose,  the  title  of  the 
bank  to  hold  the  mortgage  would  have  been  indubitable.  In  that  case 
prior  equities  of  the  mortgagor  might  have  prevailed  against  the  title 
of  the  bank ;  because  a  mortgage  is  not  a  commercial  security,  and  its 
transfer  for  any  consideration  whatever  does  not  cut  off  prior  equities. 
But  the  bona  fide  transfer  of  commercial  paper  before  maturity  does 
cut  oft"  such  equities ;  and  every  collateral  is  held  by  the  creditor  by 
such  title  and  in  such  manner  as-  appertain  to  its  nature  and  qualities. 
Security  for  the  payment  of  a  debt  actually  owing  is  a  good  considera- 
tion, and  sufficient  to  support  a  transfer  of  property.  When  such 
transfer  is  made  for  such  purpose,  it  has  due  effect  as  a  complete  trans- 
fer, according  to  the  nature  and  incidents  of  the  property  transferred. 
When  it  is  a  promissory  note  or  bill  of  exchange,  it  has  the  effect  of 
giving  absolute  title  and  of  cutting  off  prior  equities,  provided  the  ordi- 
nary conditions  exist  to  give  it  that  effect.  If  not  transferred  before 
maturity  or  in  due  course  of  business,  then,  of  course,  it  cannot  have 
such  effect.  But  I  think  it  is  well  shown  in  the  principal  opinion  that 
a  transfer  for  the  purpose  of  securing  a  debt  is  a  transfer  in  due  course. 
And  that  really  ends  the  argument  on  the  subject. 
Judgment  affirmed. 


11.  Notice* 


GOODMAN  v.  SIMONDS. 

(Supreme  Court  of  the  United  States,  1857.    20  How.  343,  15  L.  Ed.  934.) 

Action  by  Goodman,  the  holder,  against  Simonds,  the  acceptor,  of  a 
bill  of  exchange  which  had  been  placed  in  the  hands  of  one  Sigerson  to 
be  negotiated  by  him  for  the  benefit  of  Simonds.  Sigerson  pledged 
_the  bill  as  collateral  security  for  his  own  debt  to  the  plaintiff.  Upon" 
the  trial  the  court  instructed  the  jury  that  "if  such  facts  and  circum- 
stances were  known  to  the  plaintiff  as  caused  him  to  suspect,  or  that 
would  have  caused  one  of  ordinary  prudence  to  suspect,  that  Wallace 
Sigerson  had  no  interest  in  the  bill,  and  no  authority  to  use  the  same 
for  his  own  benefit,  and  by  ordinary  diligence  he  could  have  ascer- 
tained these  facts,  then  the  jury  will  find  for  the  defendant." 

4  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §S 
125-127. 


NOTICE 


213 


The  plaintiff  excepted,  and,  the  jury  finding  for  the  defendant, 
brings  error. '^ 

Clifford,  J.  The  more  important  question,  whether  the  instruc- 
tion was  correct,  remains  to  be  considered.  *  ♦  ♦  It  was  to  the 
effect  that,  if  the  plaintiff  had  acquired  the  bill  under  the  circumstances 
described  ineither  branch  of  the  instructioii^  then  he  had  acted  without 
due  cautlqn/  alidwasjiot  entitled  to  recover.  All  the  other  grounds  of 
defense  had  been  provided  for  in  otlicr  prayers  for  instruction.  This 
one  was  obviously  prepared  to  raise  the  single  question,  whether  the 
plaintiff  had  acted  with  due  caution  in  acquiring,  the  bill,  and  conse- 
quently  assumed  all  the  other  requisites  of  a  good  title  in  favor  of  the 
plaintiff.  The  only  ciucstion,  therefore,  arising  under  the  instruction, 
is  whether  the  rule  of  commercial  law  applied  to  the  case  was  correct. 
Bills  of  exchange  are  commercial  paper  in  the  strictest  sense,  and  must 
ever  be  regarded  as  favored  instruments,  as  well  on  account  of  their 
negotiable  quality  as  their  universal  convenience  in  mercantile  aft'airs. 
They  may  be  transferred  by  indorsement ;  or  when  indorsed  in  blank, 
or  made  payable  to  bearer,  they  are  transferable  by  mere  delivery.  The 
law  encourages  their  use  as  a  safe  and  convenient  medium  for  the 
settlement  of  balances  among  mercantile  men ;  and  any  course  of  ju- 
dicial decision  calculated  to  restrain  or  impede  their  free  and  unem- 
barrassed circulation  would  be  contrary  to  the  soundest  principles  of 
public  policy. 

Mercantile  law  is  a  system  of  jurisprudence  acknowledged  by  all 
commercial  nations ;  and  upon  no  subject  is  it  of  more  importance  that 
there  should  be,  as  far  as  practicable,  uniformity  of  decision  through- 
out the  world.  A  well-defined  and  correct  exposition  of  the  rights  of 
a  bona  fide  holder  of  a  negotiable  instrument  was  given  by  this  court 
in  Swift  V.  Tyson,  16  Pet.  1,  10  L.  Ed.  865,  as  long  ago  as  1842;  and 
we  adopt  that  exposition  relative  to  the  point  under  consideration  on 
the  present  occasion,  as  one  accurately  defining  the  nature  and  char- 
acter of  the  title  to  those  instruments  which  such  holder  acquires  when 
they  are  transferred  to  him  for  a  valuable  consideration.  This  court 
then  said,  and  we  now  repeat,  that  a  bona  fide  holder  of  a  negotiable 
instrument  for  a  valuable  consideration,  without  notice  of  facts  which 
impeach  its  validity  between  the  antecedent  parties,  if  he  takes  it  under 
anindorsement_m.ad.e  before  the  same  becomes  due_,  holds  the  title 
unaffected  by  these  facts,  and  may  recover  thereon,  although,  as  be- 
tween the  antecedent  parties,  the  transaction  may  be  without  any 
legal  validity.  That  question  was  not  one  of  new  impression  at  the 
date  of  that  decision,  nor  was  it  so  regarded  either  by  the  court  or 
the  learned  judge  who  gave  the  opinion ;  on  the  contrary,  it  was  de- 
clared to  be  a  doctrine  so  long  and  so  well  established,  and  so  essential 
to  the  security  of  negotiable  paper,  that  it  was  laid  up  among  the  fund- 

B  The  statomeut  of  facts  is  written  by  the  editors.  The  arguments  of  coun- 
sel and  parts  of  the  opinion  are  omitted. 


214  PURCHASER  FOR   VALUE   WITHOUT   NOTICE 

amentals  of  the  law,  and  required  no  authority  or  reasoning  to  be 
brought  out  in  its  support;  and  the  opinion  on  that  point  was  fully 
approved  by  every  member  of  the  court,  and  we  see  no  reason  to  quali- 
fy or  change  it  in  any  respect. 

Such  being  the  settled  law  in  this  court,  it  would  seem  to  follow  as 
a  necessary  consequence,  from  the  proposition  as  stated,  that  if  a 
bill_ of, exchange  indorsed  in  blank,  so  as  to  be  transferable  by  delivery, 
be  misappropriated  by  one  to  whom  it  was  intrusted,  or  even  if  it  be 
lost  or  stolen,  and  afterwards  negotiated  to  one  having  no  knowledge 
of  these  facts,  for  "a  valuable  consideration,  and  in  the  usual  course 
of  business,  his  title  would  be  good,  and  that  he  would  be  entitled  to 
recover  the  amount.  The  law  was  thus  framed,  and  has  been  so  ad- 
ministered, in  order  to  encourage  the  free  circulation  of  negotiable 
paper  by  giving  confidence  and  security  to  those  who  receive  it  for 
value ;  and  this  principle  is  so  comprehensive  in  respect  to  bills  of 
exchange  and  promissory  notes,  wdiich  pass  by  delivery,  that  the  title 
and  possession  are  considered  as  one  and  inseparable,  and  in  the  ab- 
sence of  any  explanation  the  law  presumes  that  a  party  in  possession 
holds  the  instrument  for  value  until  the  contrary  is  made  to  appear, 
and  the  burden  of-  proof  is  on  the  party  attempting  to  impeach  the 
title.  These  principles  are  certainly  in  accordance  with  the  general 
current  of  authorities,  and  are  believed  to  correspond  with  the  gen- 
eral understanding  of  those  engaged  in  mercantile  pursuits. 

The  word  "notice,"  as  used  by  this  court  on  the  occasion  referred 
to,  we  think  must  be  understood  in  the  same  sense  as  knowledge,  and 
indeed  that  is  one  of  its  usual  and  appropriate  significations.  Where 
the  supposed  defect  or  infirmity  in  the  title  of  the  instrument  appears 
on  its  face  at  the  time  of  the  transfer,  the  question  .whether  a  party 
who  took  it  had  notice  or  not  is  in^general  a  question  of  construction, 
and  must  be  determined  by  the  court  as  matter  of  law ;  and  so  it  was 
understood  by  this  court  in  Andrews  v.  Pond  et  al.,  13  Pet.  65,  10  L. 
Ed.  61,  where  it  is  said  that  "a  person  who  takes  a  bill  which  upon  the 
face  of  it  was  dishonored  cannot  be  allowed  to  claim  the  privileges 
which  belong  to  a  bona  fide  holder.  If  he  chooses  to  receive  it  under 
such  circumstances,  he  takes  it  with  all  the  infirmities  belonging  to  it, 
and  is  in  no  better  condition  than  the  person  from  whom  he  received 
it."  And  the  same  doctrine  was  adopted  and  enforced  in  Fowler  v. 
Brantly,  14  Pet.  318,  10  L.  Ed.  473,  where,  in  speaking  of  a  promis- 
sory note,  so  marked  as  to  show  for  whose  benefit  it  was  to  be  dis- 
counted, this  court  held  that  all  those  dealing  in  paper  "with  such  marks 
on  its  face  must  be  presumed  to  have  knowledge  of  what  it  imported." 
See  Brown  v.  Davis,  3  Term,  80. 

Other  cases  of  like  character,  where  the  defect  appears  on  the  face  of 
the  instrument,  are  referred  to  in  the  printed  argument  for  the  defend- 
ant as  affording  a  support  to  the  instruction  under  consideration ;  but 
it  is  so  obvious  that  they  can  have  no  such  tendency  that  we  forbear 
to  pursue  the  subject.     Ayer  v.  Hutchins,  4  Mass.  370,  3  Am.  Dec. 


NOTICE 


215 


232;   Wiggin  v.  Bush,  12  Johns.  (N.  Y.)  306,  7  Am.  Dec.  324;   Cone 
V.  Baldwin,  12  Pick.  (Mass.)  545;    Brown  v.  Tabor,  5  Wend.  (N.  Y.) 

566. 

But  it  is  a  very  different  matter  when  it  is  proposed  to  impeach 
the  title  of  a  holder  for  value  by  proof  of  any  facts  and  circumstances 
outside  of  the  instrument  itself.  He  is  then  to  be  affected,  if  at  all, 
by  what  has  occurred  between  other  parties,  and  he  may  well  claim 
an  exemption  from  any  consc(iuenccs  flowing  from  their  acts,  unless 
it  be  first  shown  that  he  had  knowledge  of  such  facts  and  circum- 
stances at  the  time  the  transfer  was  made.  Nothing  less  than  proof 
of  knowledge  of  such  facts  and  circumstances  can  meet  the  exigencies 
of  such  a  defense;  else  the  proposition  as  stated  is  not  true,  that 
a  party  who  acquires  commercial  paper  in  the  usual  course  of  busi- 
ness, for  value  and  without  notice  of  any  defect  in  the  title,  may  hold  it 
free  of  all  equities  between  the  antecedent  parties  to  the  instrument. 
Admit  the  proposition,  and  the  conclusion  follows.  And  the  question 
whether  the  party  had  such  knowledge  or  not  is  a  question  of  fact  for 
the  jury,j_aiiid,  like  other  disputed  questions  of  scienter,  must  be  sub- 
mitted to  thei'f^etermination,  under  the  instructions  of  the  court;, 
and  the  proper  inquiry  is :  Did  the  party,  seeking  to  enforce  the  pay- 
ment, have  knowledge,  at  the  time  of  the  transfer,  of  the  facts  and 
circumstances  which  impeach  the  title,  asf  between  the  antecedent  par- 
ties to  the  instrument?  And  if  the  jury  find  that  he  did  not,  then 
he  is  entTtlcd  to  recover,  unless  the  transaction  was  attended  by  bad 
faith,  even  though  the  instrument  had  been  lost  or  stolen. 

Every  one  must  conduct  himself  honestly  in  respect  to  the  antece- 
dent parties,  when  he  takes  negotiable  paper,  in  order  to  acquire  a  title 
which  will  shield  him  against  prior  equities.  While  he  is  not  obliged 
to  make  inquiries,  he  must  not  willfully  shut  his  eyes  to  the  means  of 
knowledge  which  he  knows  are  at  hand,  as  was  plainly  intimated  by 
Baron  Parke,  in  May  v.  Chapman,  16  Mees.  &  W.  355,  for  the  reason 
that  such  conduct,  whether  equivalent  to  notice  or  not,  would  be 
plenary  evidence  of  bad  faith.  Mere  want  of  care  and  caution,  which 
was  the  criterion  assumed  in  the  instruction,  falls  so  far  below  the  true 
standard  required  by  law,  which  is  knowledge  of  the  facts  and  cir- 
cumstances that  impeach  the  title,  that  we  feel  indisposed  to  pursue 
the  general  discussion,  and  proceed  to  confirm  the  views  we  have  ad- 
vanced as  to  what  the  law  is  by  referring  to  some  of  the  decisions  in 
the  English  courts,  from  which,  as  an  important  source  of  commercial 
law,  most  of  our  own  rules  upon  the  subject  have  been  derived. 

The  leading  case,  among  the  more  modern  decisions  in  that  coun- 
try, is  that  of  Goodman  v.  Harvey,  4  Ad.  &  El.  870.  That  was  a  case 
in  bank,  on  a  rule  nisi,  which  was  made  absolute.  Lord  Denman,  in 
delivering  judgment,  said:  "We  are  all  of  opinion  that  gross  negli- 
gence onlv  would  not  be  a  sufficient  answer,  where  a  party  has  given 
consideration  for  the  bill.  Gross  negligence  may  be  evidence  of  mala 
fides,  but  it  is  not  the  same  thing.     Where  the  bill  has  passed  to  the 


21G  PURCHASER  FOR   VALUE   WITHOUT   NOTICE 

plaintiff  without  any  proof  of  bad  faith  in  him,  there  is  no  objection 
to  his  title."  That  case  was  followed  by  Luther  v.  Rich,  10  Ad.  & 
El.  784,  which  was  also  argued  before  a  full  court,  and  the  same 
learned  judge  held  that  the  only  proper  mode  of  implicating  the  plain- 
tiff in  the  alleged  fraud  by  pleading  was  to  aver  that  he  had  notice  of 
it,  leaving  the  circumstances  by  which  that  notice  was  to  be  proved 
directly  or  indirectly  to  be  established  in  evidence;  and  he  further 
held  that  an  averment  that  the  plaintiff  was  not  a  bona  fide  holder 
was  not  equivalent.  According  to  the  rule  laid  down  in  Goodman  v. 
Harvey,  which  indubitably  is  the  settled  law  in  all  the  Enghsh  courts, 
proof  that  the  plaintiff"  had  been  guilty  of  gross  negligence  in  acquir- 
ing the  bill  ought  not  to  defeat  his  right  to  recover;  and,  if  not,  it 
serves  to  exemplify  the  magnitude  of  the  error  assumed  in  the  in- 
struction, that  any  facts  and  circumstances  which  would  excite  the 
suspicion  of  a  careful  and  prudent  man  were  sufficient  to  destroy  the 
title.  It  is  clear  that  one  or  the  other  of  these  rules  must  be  incorrect ; 
both  cannot  be  upheld. 

Gross  negligence  is  defined  to  consist  of  the  omission  of  that  care 
which  even  inattentive  and  tlioughtless  men  never  fail  to  take  of  their 
own  property ;  and  if  such  neglect  would  not  defeat  the  right  to  re- 
cover— and  clearly  it  would  not,  unless  attended  by  bad  faith — it 
cannot  require  any  further  reasoning  to  demonstrate  that  the  instruc- 
tion was  erroneous.  Several  cases  have  been  decided  in  England  upon 
the  same  subject,  and  to  the  same  effect,  and  the  rule  laid  down  in 
Goodman  v.  Harvey  is  now  adopted  and  sancHoned  by  the  most  ap- 
proved elementary  treatises  upon  commercial  law.  Raphael  v.  Bank  of 
England,  33  Eng.  L.  &  Eq.  276;  Stephens  v.  Foster,  1  Cromp.,  M. 
&  W.  849;  Palmer  v.  Richards,  1  Eng.  L.  &  Eq.  529;  Arbouin  v. 
Anderson,  1  Ad.  &  El.  (N.  S.)  498;  May  v.  Chapman,  16  Mees.  &  W. 
355;  Chitty  on  Bills  (12th  Ed.)  257;  Story  on  Bills  (3d  Ed.)  §  416; 
Byles  on  Bills  (4th  Am.  Ed.)  121  to  126;  Smith's  Mer.  Law  (Ed. 
1857)  255;  Edwards  on  Bills,  309;  1  Saund.  Plea.  &  Ev.  591;  Wheeler 
V.  Guild,  20  Pick.  (Mass.)  545,  32  Am.  Dec.  231;    Brush  v.  Scribner, 

11  Conn.  388,  29  Am.  Dec.  303;  Backhouse  v.  Harrison,  5  Barn.  & 
Ad.  1098;   Gwynn  v.  Lee,  9  Gill  (Md.)  138. 

These  cases,  beyond  controversy,  confirm  the  rule  laid  down  by  this 
court  in  Swift  v.  Tyson,  and  they  also  furnish  the  fullest  evidence,  by 
their  harmony  each  with  the  other,  as  well  as  by  their  entire  consistency 
with  the  principal  case,  that  the  law  has  been  uniform  since  the  de- 
cision in  Goodman  v.  Harvey,  which  was  decided  in  1836;  and  we 
think  it  will  appear,  upon  an  examination,  that  it  has  always  been  the 
same,  at  least  from  a  very  early  period  in  the  history  of  English  juris- 
prudence down  to  the  present  time,  except  for  an  interval  of  about 

12  years,  while  the  doctrine  prevailed  which  is  now  invoked  in  support 
of  the  instruction  in  this  case.  That  doctrine  had  its  origin  in  Gill  v. 
Cubit,  3  Barn.  &  Cress.  466,  and  it  was  followed  by  the  other  cases 


NOTICE  217 

referred  to  in  the  printed  argument  for  defendant.  It  was  decided 
in  1824,  and  it  is  true,  as  the  cases  cited  abundantly  show,  that  it  was 
acquiesced  in  for  a  time  as  a  correct  exposition  of  the  commercial  law 
upon  the  subject  under  consideration.  At  the  same  time,  it  is  proper 
to  remark  that  there  is  not  wanting  respectable  authority  that  it  had 
been  much  disapproved  of  before  it  was  directly  questioned  ;  and  it  is 
certain  that,  nearly  two  years  before  it  was  finally  overruled,  Parke, 
Baron,  in  delivering  judgment  in  Foster  v.  Pearson,  regarded  it  as 
mere  "dicta,  rather  than  the  decision  of  the  judges  of  the  King's 
Bench."    See  Raphael  v.  Bank  of  England,  per  Cresswell. 

The  reasons  assigned  for  that  departure  from  the  long-established 
rule  upon  the  subject  are  as  remarkable  and  unsatisfactory  as  the 
change  was  sudden  and  radical,  and  yet  their  particular  examination 
at  this  time  is  unnecessary.  It  is  a  sufficient  answer  to  the  case  to 
say  that  it  has  been  distinctly  overruled  in  the  tribunal  where  it  was 
decided,  and  has  not  been  considered  an  authority  in  that  court  for 
more  than  20  years.  The  doctrine,  says  Mr.  Chitty  in  his  treatise 
on  Bills,  is  now  completely  exploded,  and  the  old  rule  of  law  that  the 
holder  of  bills  of  exchange,  indorsed  in  blank  and  transferable  by 
dehvery,  can  give  a  title  which  he  does  not  possess  to  a  person  taking 
them  bona  fide  for  value,  is  again  re-established  in  its  fullest  extent. 
It  was  not,  however,  accomplished  at  a  single  blow;  but  the  error, 
so  to  speak,  was  literally  broken  up  and  destroyed  by  installments. 
The  foundation  of  the  superstructure  was  severely  shaken  in  Crook 
V.  Jadis,  5  Barn.  &  Ad.  909,  when  the  full  bench  first  came  to  the 
conclusion  that  want  of  due  care  and  caution  were  insufficient  to 
constitute  a  defense,  and  that  gross  negligence,  at  least,  must  be  shown 
to  defeat  a  recovery.  But  it  was  left  to  the  case  of  Goodman  v.  Har- 
vey to  announce  a  complete  correction  of  the  error,  when  Lord  Den- 
man  declared  we  have  shaken  off  the  last  remnant  of  the  contrary  doc- 
trine. 

A  brief  reference  to  some  of  the  earlier  cases  will  be  sufficient  to 
show  that  the  decision  in  Gill  v.  Cubit  was  a  departure  from  the  well- 
known  and  long-established  rule  upon  the  subject  under  consideration. 
One  of  the  earliest  cases  usually  referred  to  is  that  of  Hinton's  Case, 
reported  in  2  Show.  247.  It  was  an  action  of  the  case  against  the 
drawer  upon  a  bill  of  exchange  payable  to  bearer.  The  court  ruled 
that  the  holder  must  entitle  himself  to  it  on  a  consideration;  "for 
if  he  come  to  be  bearer  by  casualty  or  knavery,  he  shall  not  have  the 
benefit  of  it."  And  so  in  Anonymous,  1  Salk.  126,  where  a  bank  note 
payable  to  A.,  or  bearer,  was  lost,  and  found  by  a  stranger,  and  by 
him  transferred  to  C.  for  value.  Holt,  C.  J.,  held  that  "A.  might  have 
trover  against  the  stranger,  for  he  had  no  title  to  it,  but  not  against 
C,  by  reason  of  the  course  of  trade,  which  creates  a  property  in  the 
bearer."  And  again  in  Miller  v.  Race,  1  Burr.  462,  where  an  innkeep- 
er received  a  bank  note  from  his  lodger  in  the  course  of  business. 


218  PURCHASER  FOR   VALUE   WITHOUT  NOTICE 

and  paid  the  balance,  Lord  Mansfield  held  he  might  retain  it,  as  he 
came  by  it  fairly  and  bona  fide,  and  for  value,  and  without  knowl- 
edge that  it  had  been  stolen.  And  on  a  second  occasion,  in  Grant 
V.  \'aughan,  3  Burr.  1516,  where  a  bill  payable  to  bearer  was  lost,  and 
the  finder  passed  it  to  the  plaintiff,  the  same  court  left  it  to  the  jury 
to  find  whether  he  came  to  the  possession  fairly  and  bona  fide.  But 
a  still  stronger  case  is  that  of  Peacock  v.  Rhodes,  2  Doug.  633,  where 
a  bill  of  exchange,  indorsed  in  blank,  was  stolen  and  passed  to  the 
plaintiff  by  a  man  not  known.  It  was  argued  for  the  defendant  that 
a  holder  should  not  in  prudence  take  a  bill  unless  he  knew  the  person. 
Lord  Mansfield  answered  "that  the  law  is  well  settled  that  a  holder 
coming  fairly  by  a  bill  has  nothing  to  do  with  the  transaction  be- 
tween the  original  parties.  *  *  *  The  question  of  mala  fides  wa^ 
for  the  consideration  of  the  jury.";  And  lastly,  and  to  the' same  ef- 
fe^tTTs'Lawson  v.  Weston  et  al.,  4  Esp.  R.  56,  where  a  bill  of  exchange 
for  £500.  was  lost  or  stolen,  and  was  discounted  by  plaintiff  for  a 
stranger.  It  was  insisted  for  the  defendant  that  "a  banker  or  any 
other  person  should  not  discount  a  bill  for  one  unknown,  without 
using  diligence  to  inquire  into  the  circumstances."  Lord  Kenyon 
replied  that  "to  adopt  the  principles  of  the  defense  would  be  to  par- 
alyze the  circulation  of  all  the  paper  in  the  county,  and  with  it  all 
its  commerce;  that  the  circumstance  of  the  bill  having  been  lost 
might  have  been  material,  if  they  could  bring  knowledge  of  that  fact 
home  to  the  plaintiff." 

The  cases  cited,  commencing  in  1694  and  ending  in  1801,  are  suf- 
ficient to  show  what  the  state  of  the  law  was  in  1824,  when  Gill  v. 
Cubit  was  decided,  especially  as  the  judges  of  the  King's  Bench,  in 
giving  their  opinions  on  that  occasion,  did  not  pretend  that  there  were 
any  later  decisions  in  which  it  had  been  modified.     *     *     * 

Judgment  reversed. 


ROCHESTER  &  C.  TURNPIKE  ROAD  CO.  v.  PAVIOUR. 

(Court  of  Appeals  of  New  York,  1900.     164  N.   Y.  2S1,  58  N.  E.  114,  52  L. 

R.  A.  790.) 

Appeal  from  a  judgment  of  the  Supreme  Court,  entered  April  8, 
1898,  upon  an  order  of  the  Appellate  Division  in  the  Fourth  Judicial 
Department,  overruling  defendant's  exceptions,  ordered  to  be  heard 
in  the  first  instance  by  the  Appellate  Division,  denying  a  motion  for 
a  new  trial  and  directing  judgment  for  the  plaintiff"  upon  a  verdict  di- 
rected by  the  court. 

Mrs.  Warren,  an  insurance  agent,  delivered  certain  policies  of  in- 
surance covering  premises  in  New  Mexico  to  the  defendant,  directing 
him  to  collect  thej^remiums  due  upon  the  saVne  from  the  insured.  The 
defendant  delivered  the  policies  to  one  Briggs  for  the  insured,  Briggs 
agreeing  to  pay  the  premiums.     The  premiums  were  not  paid  at  the 


NOTICE 


219 


time  either  set  of  policies  was  delivered ;  but,  after  payment  had  been 
demanded  several  times  by  the  defendant,  Briggs  gave  him  a  check  on 
account,  dated  June  17,  1896,  drawn  upon  the  Central  Bank  of  Roches- 
ter, payable  to  the  order  of  the  defendant,  for  $150,  signed,  "Roches- 
ter &  Charlotte  Turnpike  Road  Co.  M.  H.  Briggs,  Treas."  On  the 
24th  of  July  following,  Briggs  gave  the  defendant  a  check,  similar  in 
all  respects,  except  that  it  was  for  the  sum  of  $300,  and  subsequently 
he  paid  the  balance  of  the  premiums  from  his  own  funds.  The  defend- 
ant deposited  these  checks  in  the  Traders'  Bank  of  Rochester,  where 
he  did  his  banking  business,  procured  drafts  for  the  amount  owing  to 
Mrs.  Warren,  and  sent  them  to  her.  The  checks  were  paid  upon  pres- 
entation in  the  ordinary  course  of  business  from  moneys  belonging  to 
the  plaintiff  on  deposit  in  the  Central  Bank. 

This  action  was  brought  to  recover  the  amount  paid  by  means  of 
these  checks  as  money  of  the  plaintiff  received  by  the  defendant  to  its 
use.  The  plaintiff  had  no  interest  in  the  policies  and  no  business  re- 
lations with  the  defendant,  and  was  indebted  neither  to  him  nor  to 
Briggs,  who  used  the  checks  without  authority  and  thus  embezzled 
thejiion£^^2lIIy.i},  thereby.  At  the  close  of  the  evidence  the  court  di- 
rected a  verdict  for  the  plaintiff,  but  ordered  the  defendant's  excep- 
tions to  be  heard  in  the  first  instance  by  the  Appellate  Division,  which, 
after  hearing  the  parties,  overruled  the  exceptions  and  directed  judg- 
ment upon  the  verdict  in  favor  of  the  plaintiff.  From  said  order,  as 
well  as  from  the  judgment  entered  accordingly,  the  defendant  brings 
this  appeal.^ 

Vanx,  J.  By  delivering  the  policies  to  Brjorgs  without  collecting 
the  premiums  _at  the^irne7  the  defendant  apparently  gave  credit  for 
the  sameVnd  thus  made  the  debt  his  own.  At  all  events,  he  subse- 
quently treated  it  as  a  3ebt  owing  by  Briggs  to  himself,  the  same  as 
he  had  similar  claims  under  like  circumstances  in  previous  years. 
Briggs  had  no  authority,  either  actual  or  apparent,  to  give  the  checks 
of  the  plaintiff  in  paynient  of  his  own  debt  or  that  of  a  third  person. 
If  the  defendant  knew  or  believed,  or  had  good  reason  to  believe,  that, 
irTgivTn-  llic  olucks,  I'-riggs  was  appropriating  the  money  of  the  plain- 
tifif  to  the  i)aymcnt  of  his  own  debt,  or  one  that  he  treated  as  his  own, 
he  had  no  right,  to  accept  them  without  inquiry.  While  he  was  not 
bound  to  be  on  the  watch  for  facts  which  would  put  a  very  cautious 
man  on  his  guard,  he  was  bound  to  act  in  good  faith.  Second  Na- 
tional Bank  V.  Weston,  161  N.  Y.  520,  526,  55  N.  E.  1080,  76  Am. 
St.  Rep.  283;  Cheever  v.  Pittsburgh,  etc.,  R.  R.  Co.,  150  N.  Y.  59, 
66,  44  N.  E.  701,  34  L.  R.  A.  69,  55  Am.  St.  Rep.  646.  Even  if  his 
actual  good  faith  is  not  questioned,  if  the  facts  known  to  him  should 
have  led  him  to  inquire,  and  by  inquiry  he  would  have  discovered  the 
real  situation,  in  a  commercial  sense  he  acted  in  bad  faith,  and  the 

6  The  statement  of  facts  is  abridged. 


220  PUKCHASER  FOR  VALUE  WITHOUT  NOTICE 

law  will  withhold  from  him  the  protection  that  it  would  otherwise 
extend. 

The  checks  themselves  gave  notice  of  a  suspicious  fact  and  invited 
inquir^•  h]  relation  thereto.  They  showed  upon  their  face  that  Briggs 
wli^ .._  ..  .-i.ily  usii;--  the  money  of  the  plaintiff  for  his  own  purposes, 
since  they  were  not  his  checks,  but  the  checks  of  a  corporation  issued 
by  him  as  its  treasurer.  In  the  absence  of  express  authority,  or  of  that 
which  may  be  implied  from  past  conduct  known  to  the  corporation,  he 
could  not  lawfully  use  the  checks,  which  stood  as  its  money,  for  such 
a  purpose,  as  the  defendant  is  presumed  to  have  known.  There  was 
no  express  authority  and  nothing  to  indicate  that  Briggs  was  implied- 
ly authorized  to  thus  use  the  money  of  the  plaintiff,  and  the  presump- 
tion was  the  other  way.  The  plaintiff,  as  its  name  indicated,  was  not 
a  trading  corporation,  but  a  local  plank  road  company,  with  no  author- 
ity to  own  buildings  situated  out  of  the  state.  It  would  be  extraordi- 
nary for  a  concern  which  merely  operated  a  short  plank  road  in  this 
state  to  have  any  interest  in  buildings  in  New  Mexico,  or  to  be  indebt- 
ed for  premiums  upon  policies  issued  thereon,  and  the  admitted  facts 
compel  us  to  assume  that  the  defendant  so  regarded  it.  Moreover,  the 
policies  themselves,  as  the  defendant  knew,  were  not  issued  in  the 
name  of  the  plaintiff  as  the  owner  of  the  buildings,  and  there  was  no 
connection,  apparent  or  otherwise,  between  it  and  the  policies.  With- 
out inquiry  he  accepted  checks  drawn  by  Briggs  as  treasurer  of  the 
plaintiff  in  payment  of  a  debt  which  he  had  no  reason  to  believe  was 
for  it  to  pay,  and  which  he  had  strong  reason  to  believe  had  become 
the  debt  of  Briggs  himself.  He  called  for  no  explanation  from  him, 
made  no  inquiry  at  the  office  of  the  plaintiff,  or  of  any  one  represent- 
ing it,  which  would  naturally  have  disclosed  the  fraud,  but  accepted  the 
checks  without  question,  drew  the  money,  and  thereby  ran  the  risk  of 
being  called    upon  to  restore  it. 

The  facts  known  to  the  defendant  should  have  aroused  his  suspicion 
and  led  him,  as  an  honest  man,  to  make  some  investigation  before  he_ 
accepted  the  money  of  a  corporation,  which  owned  him  nothing,  in 
payment  of  a  claim  that  he  held  against  some  one  else.  If  he  had  such 
confidence  in  Briggs  that  he  was  willing  to  trust  him  without  inquiry, 
under  suspicious  circumstances  of  a  substantial  character,  he  must 
stand  the  loss,  for  he  failed  to  discharge  a  duty  required  by  commer- 
cial integrity.  He  could  not  confide  in  Briggs  at  the  expense  of  the 
plaintiff,  after  notice  of  his  irregular  and  doubtful  conduct.  Among 
the  heaviest  losses  in  business  are  those  which  result  from  a  blind  trust 
in  men  on  account  of  their  standing  in  the  community,  without  making 
the  investigation  required  by  common  prudence.  There  was  a  shadow 
on  the  checks,  and  the  defendant  could  not,  in  good  faith,  accept  them 
until  it  disappeared.  By  accepting  them  he  did  an  act  which  he  had 
reason  to  believe  would  affect  the  rights  of  a  third  party,  and  he  could 
not,  in  justice  to  that  party,  ignore  the  suspicion  which  the  facts  should 
have  aroused.    One  who  suspects,  or  ought  to  suspect,  is  bound  to  in- 


NOTICE  21il 

quire,  and  the  law  presumes  that  he  knows  whatever  proper  inquiry 
would  disclose.  While  the  courts  are  careful  to  guard  the  interests 
of  commerce  by  protecting  the  negotiation  of  commercial  paper,  they 
are  also  careful  to  guard  against  fraud  by  defeating  titles  taken  in  6ad 
faith,  or  with  knowledge,  actual  or  imputed,  which  amounts  to  bad 
faith,  when  regarded  from  a  commercial  standpoint.  2  Randolph, 
Com.  Paper  (2d  Ed.)  §  999;  1  Daniel,  Negotiable  Instruments  (4th 
Ed.)  §  775;  1  Edwards,  Bills  &  Notes  (3d  Ed.)  §§  517,  520;  1  Par- 
sons, Notes  &  Bills,  259;  Story  on  Promissory  Notes  (6th  Ed.)  §  197; 
Chitty  on  Bills  (8th  Ed.)  281. 

As  the  rules  of  law  governing  the  case  are  now  well  settled,  we  shall 
refer  to  but  few  authorities,  and  those  of  recent  date  in  this  court. 
In  Wilson  v.  Metropolitan  El.  Ry.  Co.,  120  N.  Y.  145,  24  N.  E.  384, 
17  Am.  St.  Rep.  625,  it  was  stated,  as  a  general  rule,  "that  one  who 
receives  from  an  officer  of  a  corporation  the  notes  or  securities  of  such 
corporation,  in  payment  of,  or  as  security  for,  a  personal  debt  of  such 
officer,  does  so  at  his  own  peril.  Prima  facie  the  act  is  unlawful,  and, 
unless  actually  authorized,  the  purchaser  will  be  deemed  to  have  taken 
them  with  notice  of  the  rights  of  the  corporation."  It  was  also  held  in 
that  case  that  the  purchaser  of  a  promissory  note,  purporting  to  have 
been  issued  by  a  corporation,  who  made  the  purchase  under  circum- 
stances which  devolved  upon  him  the  duty  of  inquiry  as  to  its  validity, 
assumed  the  risk,  by  failing  to  inquire,  of  proving  that  the  facts  he 
could  have  discovered,  had  he  made  inquiry,  would  have  protected 
him. 

In  Gerard  v.  McCormick,  130  N.  Y.  261,  29  N.  E.  115,  14  L.  R.  A. 
234,  an  agent,  who  had  charge  of  certain  premises  known  as  the  "Glass 
Buildings,"  deposited  the  rents  collected  by  him  to  the  credit  of  a 
bank  account  kept  in  his  name  as  "Agent,  Glass  Buildings."  Without 
authority  he  gave  a  check  on  this  account,  signed  by  him  as  "Agent, 
Glass  Buildings,"  in  payment  of  his  own  debt.  The  check  was  paid, 
and,  upon  the  trial  of  an  action  brought  five  years  afterwards  to  re- 
cover the  amount  thereof,  there  was  no  evidence  of  bad  faith  on  the 
part  of  the  defendant  who  took  the  check,  except  that  afforded  by  the 
check  itself  and  the  nature  of  the  debt.  The  court  held  that  the  form 
of  the  check  was  sufficient  to  indicate  to  the  defendant  the  existence 
of  an  agency  and  to  put  him  on  inquiry  as  to  the  agent's  authority  to 
so  use  the  money.  In  deciding  the  case,  the  court  said :  "W^e  think- 
that  the  form  of  the  signature  to  the  check  was  sufficient  to  put  the 
payee  on  inquiry  as  to  the  right  of  the  agent  to  pay  his  personal  debt 
out  of  the  fund.  The  buildings  and  the  bank  were  both  well  known, 
were  in  the  same  city  and  very  near  to  the  place  where  the  check  was 
received  by  the  defendant,  and  had  an  inquiry  been  made  at  the  bank 
or  at  the  buildings  it  would  have  been  ascertained  that  the  account 
was  held  by  William  Boswell,  not  as  owner,  but  as  agent  for  these 
plaintiffs.  In  case  a  person^,  having  notice  that  money  or  property  is 
held  by  another  In  a  fiduciary  capacity,  receives  it  without  inquiry  from 


222  PURCHASER  FOR   VALUE   WITHOUT   NOTICE 

the  a^ciit  in  >>:;;.- i\.ction  of  his  per^nal  debt,  the  sum  or  property  so. 
received  may  be  recovered  by  the  true  o\vner,  unless  the  agent  was 
authorized  to  so  dispose  of  it." 

.  In  Cheever  v.  Pittsburgh  R.  R.  Co.,  150  N.  Y.  59,  67,  44  N.  E.  701, 
34  L.  R.  A.  69,  55  Am.  St.  Rep.  646,  the  paper  was  regular  on  its  face, 
and  this  fact  protected  the  plaintiff;  but  the  court,  referring  to  "a 
case  where  an  officer  of  a  corporation  makes  the  corporate  obligation 
payable  to  himself,  and  then  attempts  to  deal  with  it  for  his  own  ben- 
efit," said :  "When  paper  of  that  character  is  presented  by  the  officer 
or  agent  of  the  corporation,  it  bears  upon  its  face  sufficient  notice  of 
the  incapacity  of  the  officer  or  agent  to  issue  it" — citing  the  Wilson  and 
Gerard  Cases,  supra,  and  also  Hanover  Bank  v.  American  Dock  & 
T.  Co.,  148  N.  Y.  612,  43  N.  E.  72,  51  Am.  St.  Rep.  721;  Bank  of 
Xew  York,  etc.,  v.  American  Dock  &  T.  Co.,  143  N.  Y.  559,  38  N.  E. 
713.  In  the  case  at  bar  the  appearances  were  not  deceptive,  but  sug- 
gested the  true  state  of  affairs,  which  worked  a  fraud  on  the  plaintiff'. 
See,  also,  First  Nat.  Bank  of  Paterson  v.  National  Broadway  Bank, 
156  N.  Y.  459,  51  N.  E.  398,  42  L.  R.  A.  139;  Smith  v.  Weston,  159 
N.  Y.  194.  199,  54  N.  E.  38;  Angle  v.  North  Western,  etc.,  Ins.  Co., 
92  U.  S.  330,  342,  23  L.  Ed.  556. 

The  case  of  Dike  v.  Drexel,  11  App.  Div.  77,  42  N.  Y.  Supp.  979, 
affirmed  without  opinion  in  155  N.  Y.  dliJ ,  49  N.  E.  1096,  which  is  re- 
lied upon  by  the  defendant,  does  not  conflict  with  the  views  herein  ex- 
pressed. According  to  the  facts  found  in  that  case,  a  new  firm  had 
succeeded  an  old  firm,  composed  in  part  of  the  same  members,  and 
with  a  similar,  but  not  identical,  firm  name.  The  business  of  the  new 
firm  "w-as  apparently  the  same  as  and  a  continuation  of  that"  of  the  old, 
"and  such  appearance  was  a  natural  result  of  the  conduct  and  acqui- 
escence of  the  other  members  of  the  new  firm,  from  the  formation  and 
during  the  entire  continuance  thereof."  "In  fact,  the  business  and 
assets  of  the  old  firm  were  so  mingled  with  those  of  the  new  firm  as 
to  establish  a  practical  identity  between  the  two  firms."  The  new  firm 
gave  certified  checks  to  be  applied  upon  an  indebtedness  of  the  old, 
which  the  former  had  not  assumed.  Said  checks  were  received  "in 
absolute  good  faith"  and  collateral  securities  were  surrendered  in  con- 
sequence thereof.  Under  these  peculiar  circumstances  it  was  decided 
that  the  receiver  of  the  new  firm,  which  had  become  insolvent,  could 
not  recover  the  money  back.  Owing  to  the  intimate  connection,  if  not 
substantial  identity,  of  the  two  firms,  the  Supreme  Court  held  that 
there  was  nothing  suspicious  or  unusual  in  paying  a  debt  of  the  old 
firm  with  a  check  of  the  new  concern,  nor  any  notice  that  in  so  doing 
the  funds  of  the  new  partnership  were  being  improperly  used.  It  was 
natural  to  assume,  under  the  circumstances,  that  the  new  firm  had 
bought  out  the  old,  and  being  indebted  to  it  for  the  purchase  price, 
had  paid  a  part  of  the  debt  in  this  way  through  the  direction  of  a  mem- 
ber common  to  both,  "to  whom,"  as  the  trial  judge  found,  "the  other 
three  partners  confided  the  unrestricted,  absolute,  and  entire  control 


PRESUMTTIONS    AND    BURDEN    OF   PROOF  223 

and  management  of  the  business,  allowing  him  to  conduct  it  as  though 
it  were  his  own,  and  in  its  behalf  to  incur  liabilities  and  dispose  of 
assets  absolutely  according  to  his  own  judgment."  Thus  it  is  obvi- 
ous that  the  managing  copartner  had  implied  authority  from  his  as- 
sociates to  use  the  checks  as  he  did,  and  that  the  question  of  notice 
was  not  necessarily  involved  in  the  decision. 

In  the  case  now  before  us  the  question  of  notice  is  supreme.     The 


checks,  when  read  in  the  li^ht  of  the  facts  known  to  the  defendant, 
werenolice  to~rTTm"tlTat  he  was  apparently  accepting  money  from  one 
to  whom  it  did  not  belong,  and  this  cast  upon  him  the  duty  of  inquir- 
ing  into  the  matter  so  as  to  see  whether  the  facts  were  in  accord  with 
the  appearances ;  for,  if  they  were,  he  knew  that  he  could  not  honest- 
ly take  the  checks. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 


III.  Presumptions  and  Burden  of  Proof  ' 


KERR  V.  ANDERSON. 

(Supreme  Court  of  North  Dakota,  1907.     16  N.  D.  36,  111  N.  W.  614.) 

Morgan,  C.  J.  Action  upon  a  promissory  note  by  the  plaintifit,  as 
indorsee,  against  the  defendant,  as  maker  thereof.  The  complaint  al- 
leges the  execution  and  delivery  and  nonpayment  of  the  note  at  ma- 
turity, and  that  the  same  was  duly  indorsed  to  the  plaintiff  before 
maturity  for  a  valuable  consideration  in  due  course  of  business.  The 
answer  is  a  general  denial.  A  jury  was  impaneled.  Plaintiff  estab- 
lished the  due  indorsement  of  the  note  by  the  payee,  and  offered  the 
note  in  evidence,  which  was  received  without  objection,  and  thereupon 
rested.  Defendant  rested  without  oft'ering  any  evidence.  Plaintiff" 
moved  the  court  to  direct  a  verdict  in  his  favor,  and  the  motion  was 
denied.  The  defendant  then  moved  for  a  directed  verdict  in  his  favor, 
which  was  granted.  Plaintiff  excepted  to  the  rulings  on  each  of  these 
motions.  Plaintiff  thereafter  moved  for  a  judgment  notwithstanding 
the  verdict,  and  for  a  new  trial.  Both  motions  were  denied.  Plain- 
tiff appeals  from  the  order  denying  these  motions. 

The  record  does  not  disclose  the  grounds  upon  wdiich  the  trial 
court  granted  defendant's  motion  for  a  directed  verdict.  In  their 
printed  argument,  the  defendant's  attorneys  attempt  to  sustain  the 
trial  court's  action  upon  the  ground  that  plaintiff  oft'ercd  no  evidence 
to  show  that  he  was  an  innocent  purchaser  of  the  note  before  maturity. 
It  was  not  necessary  to  offer  such  evidence.     The  presumption  is  that 

T  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
12S-131. 


224 


PURCHASER  FOR  VALUE   WITHOUT  NOTICE 


the  indorsement  was  made  in  the  regular  course  of  business.  The 
statute  expressly  so~'declares,  and'gV^ry.  holder  of  negotiable  instru- 
ments is  deemed  prima  facie  to  be  a  holder  in  due_course,  unless  the 
title  of  tlie  person  negotiating  the  instrument  is  shown  to  be  defective^ 
for  fraud  or  other  reasons.  When  this  is  shown,  the  burden  is  then 
upon  the  holder  to  show  that  he  took  the  instrument  in  due  course. 
Section  6361,  Rev.  Code  1905.  This  court  has  often  held  that  the 
holder  of  a  negotiable  instrument  is  not  primarily  bound  to  establish 
that  he  is  an  innocent  purchaser.  Shepard  v.  Hanson,  9  N.  D.  249, 
83  N.  W.  20;  Id.,  10  N.  D.  194,  86  N.  W.  704.  Plaintiff  produced 
the  note  in  court  duly  indorsed,  and  by  so  doing  established  prima 
facie  that  he  acquired  title  thereto  in  due  course  of  business. 
Daniel  on  Neg.  Ins.  §  812,  and  cases  cited. 

The  fact  that  plaintiff  alleged  in  his  complaint  that  the  note  was 
purchased  by  him  before  maturity  did  not  make  it  incumbent  on  him 
to  establish  that  fact  by  evidence.  The  statutory  presumption  was  in 
force  with  or  without  such  allegation.  It  was  therefore  error  to  di- 
rect a  verdict  in  defendant's  favor.  Plaintiff  requests  this  court  to 
order  judgment  in  his  favor  notwithstanding  the  verdict.  This  is 
not  a  proper  case  for  such  a  judgment.  Defendant  may  be  able  to 
show  upon  another  trial  that  the  allegations  of  the  complaint  are  not 
true.     *     *     * 

Order  reversed. 


f  l^^il 


PRESENTMENT  AND  NOTICE  OF  DISHONOR  221 


PRESENTMENT  AND  NOTICE  OF  DISHONOR 

I.  Presentment ' 


GOUPY  et  al.  v.  HARDEN  et  al. 
(Court  of  Common  Pleas,  ISIG.     7  Taunt.  159.) 

This  was  an  action  brought  against  the  defendants  as  indorsers  of 
two  bills  of  exchange,_for_£400.  and  i600.  drawn  on  12th  May,  1815, 
by  De  Franca  &  Co.  upon  Gould  Bros.  &  Co.,  merchants  at  Lisbon,  at 
30_days  after  sight,  payable  to  the  defendants,  and  by  them  indorsed 
to  the  plaintift's,  who  were  merchants  at  Paris,  and  who'm^orsed"  the 
bills  to  Ricci  &  Sons,  merchants  at  Genoa,  who  also  negotiated  the  bills. 
The  bills  were  presented  to  Goulds  for  acceptance,  on  the  22d  August 
in  the  same  year,  when  they  were  refused,  and  protested  for  nonac- 
ceptance ;  but  were  accepted  by  Montano,  under  protest,  for  the  honor 
of  Ricci  &  Co.  The  bills  were  again,  on  20th  September,  when  due, 
presented  to  Goulds  for  payment,  which  was  also  refused,  and  a  pro- 
test made,  and  Montano  paid  them  for  the  credit  of  Ricci  &  Co.,  where- 
by the  plaintiffs  were  obliged  to  pay  the  amount  of  the  bills,  with  costs, 
charges,  interest,  exchange,  and  re-exchange.  Upon  the  trial  of  this 
cause,  at  the  sittings  in  London  after  Trinity  term,  1816,  before  Gibbs, 
C.  J.,  it  appeared  that  the  plaintiff's  had  employed  the  defendants,  who 
were  merchants  in  London,  for  a  commission  of  one  half  per  cent.,  to 
procure  in  London,  and  transmit  to  them  to  Paris,  bills  on  Portugal 
for  iljCOO.  The  plaintiffs  accordingly  purchased  upon  the  Exchange 
the  bills  in  question,  and  having  specially  indorsed  them  to  the  plain- 
tiffs, transmitted  them  to  Paris ;  the  plaintiffs  indorsed  them  to  Ricci 
&  Sons,  merchants  at  Genoa,  who  further  negotiated  them.  On  the 
15th  of  July,  De  Franca  failed.  Goulds  had  paid  bills  drawn  on  them 
so  late  as  the  30th  of  June,  1815.  On  the  12th  of  October,  the  plain- 
tiffs by  letter  apprised  the  defendants  of  the  dishonor  of  the  bills,  and 
in  a  subsequent  letter  stated  that  they  should  certainly  have  sooner 
sent  forward  the  bills  for  acceptance,  had  they  not  relied  on  the  de- 
fendants' guaranty.  The  defendants  contended,  first,  that  they,  hav- 
ing indorsed^  these  bills_  to  fjie  plaintiffs  only  as  their  agents,  were  not 
liable  ori  that  indorsement.  Evidence  was  given  that  when  agents  in- 
dorse foreign  bills  for  .the  mere  purpose  of  transmitting  them,  without 
intending  to  incur  responsibility  for  the  payment,  it  is  their  practice  to 
add  to  the  indorsement  the  words  "sans  recours";    that  these  words 

iFor  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
133-144. 

MooBE  Cases  B.&  N. — 15 


226  PRESENTMENT  AND  NOTICE  OF  DISHONOR 

however,  implying  a  doubt  in  the  mind  of  the  indorser  of  the  stability 
of  some  of  the  parties,  injure  the  credit  of  the  bills,  and  therefore  are 
usually  omitted,  if  a  confidence  exists  between  the  parties,  although  it 
is  nevcriheless  intended  that  the  agent  should  not  be  responsible  for  tlie 
goodness  of  the  bills ;  and  the  defendants  contended  that  such  was  the. 
coijrse~oT  'dealing^  in  the  present  instance,  as  evinced  by  "ElTe~low  rate 
of  commission  which  the  defendants  were  to  receive.  Th§  defendants 
also  contended  that  tliey  were  discharged  by  laches ;  for  that  the  bills 
ought  to  have  been  sooner  presented  to  the  drawee  for  acceptance, 
and  not  sent  round  from  Paris  to  Italy,  by  which  the  presentment  for 
acceptance,  and  consequently  the  period  of  payment,  had  been  many 
months  delayed ;  and  if  the  bills  had  been  presented  for  acceptance  .in 
the  beginning  of  June,  they  would  have  been  payable  before  Goulds 
ceased  to  honor  the  drawers'  demands,  and  before  the  drawers  them- 
selves had  become  insolvent.  The  jury,  however,  found  a  verdict  for 
the  plaintiffs;   which 

Lens,  Serjt.,  now  moved  to  set  aside,  on  the  grounds,  first,  that  an 
agent,  under  these  circumstances,  was  not  liable  upon  his  indorsement ; 
next,  that  the  presentment  of  a  bill  payable  at,  or  a  certain  time  after 
sight,  could  not  be  protracted  to  an  indefinite  or  unreasonable  period 
without  discharging  the  parties. 

GiBBS,  C.  J.  This  is  an  action  brought  against  the  indorser  of  two 
bills  at  30  days'  sight;  and  the  verdict  is  for  the  plaintiffs.  Objections 
are  made  to  their  right  to  recover,  on  two  grounds :  First,  that  though 
the  bills  were  indorsed  by  the  defendants,  the  defendant,  under  the 
circumstances,  is  not  liable  on  his  indorsement.  Secondly,  that  there 
.has  been  laches  in  not  presenting  the  bills  for  acceptance  within  a 
shorter  time.  As  to  the  first  objection,  here  is  an  unqualified  indorse- 
ment. It  is  not  proved  that  the  plaintiffs  knew  that  the  defendants 
were  connected  with  the  bill  otherwise  than  as  agents;  but  if  they  had 
known  it,  and  I  will  take  it  in  the  strongest  way,  that  they  knew  the 
defendants  were  acting  only  as  agents,  still  they  had  a  right  to  con- 
sider, that  in  this  transaction  the  defendants  were  liable  as  indorsers ; 
and  they  may  justly  say,  as  they  have  done:  "We  should  have  sent 
forward  these  bills  for  acceptance,  unless  we  had  seen  your  names  on 
them,  which  placed  the  respectability  of  the  bills  beyond  a  question; 
otherwise  we  should  have  sought  the  security  of  the  drawee." 

But  this  leaves  the  second  objection  untouched.  If  these  bills  had 
been  locked  up  and  not  sent  into  circulation,  the  case  would  have  been 
widely  different.  I  know  dicta  may  be  found,  that  a  bill  payable  at 
sight  must  be  presented  within  a  reasonable  time ;  but  this  very  ques- 
tion occurred  in  this  Court  in  the  case  of  Muilman  v.  De  Eguino,  2  H. 
Bl.  565,  bills  were  sent  out  to  India,  and  one  question  was,  whether 
they  were  presented  for  acceptance  within  a  reasonable  time  in  India, 
and  it  was  held  that  they  were ;  but  the  main  question  was,  whether 
they  were  delayed  too  long  in  Europe,  before  they  were  sent  out.  Up- 
on the  last  point,  Eyre,  C.  J.,  says :  "There  would  be  a  great  difficulty 


PRESENTMENT  2-7 


in  saying  at  what  time  such  a  bill  should  be  presented  for  acceptance. 
The  courts  have  been  very  cautious,  in  fixing  any  time  for  an  inland 
bill,  payable  at  a  certain  period  after  sight,  to  be  presented  for  accept- 
ance ;  and  it  seems  to  me  more  necessary  to  be  cautious  with  respect 
to  a  foreign  bill  payable  in  that  manner.  I  do  not  see  how  the  courts 
can  lay  down  any  precise  rule  on  the  subject."  Heath,  J.,  says:  "No 
rule  can  be  laid  down  as  to  the  time  for  presenting  bills  drawn  pay- 
able at  sight  or  a  given  time  after."  The  jury  have  found  that  these 
bills  were  presented  in  a  reasonable  time,  but  the  law  ]j_rescribes  only ^ 
thaTthey  must  be  prcMjiiud  at  some  time.  lluUer,  J.,  is  still  stronger, 
and  lays  down  the  ruTe  only  that  the  bill  must  be  put  into  circulation. 
In  the  present  instance,  these  bills  were  put  into  circulation,  and  they 
passed  through  Paris  and  Genoa.  '  He  proceeds  to  say :  "If  they  are 
circulated,  the  parties  are  known  to  the  world,  and  their  credit  is 
looked  to,  and  if  a  bill  drawn  at  three  days'  sight  were  kept  out  in  that 
way  for  a  year,  I  cannot  say  there  would  be  laches.  But  if,  instead^^ 
of  putting  it  into  circulation,  the  holder  were  to  lock  "ifTip  for" any 
length  of  time,  I  should  say  that  he  was  guilty  of  laches."  I  ani  there-' 
fore "clearly~oT  "opinion  that  the  i3arties  were  not  guilty  of  laches  in 
putting  this  bill  into  circulation,  before  it  was  presented  for  acceptance. 

Dallas,  J7~The  defendants  might  have  specially  indorsed  this  bill 
sans  recours,  if  they  had  thought  fit  so  to  do,  but  they  have  not  done  it. 

The  rest  of  the  court  concurred  in  refusing  the  application. 


HART  V.  SMITH. 
(Supreme  Court  of  Alabama,  1S49.     15  Ala.  807,  50  Am.  Dec.  161.) 

Error  to  the  county  court. 

The  facts  of  this  case  are  fully  shown  in  the  opinion  of  the  court. 

Stone,  for  plaintiff  in  error. 

T.  J.  Judge,  contra. 

1.  Bills  payable  at  sight,  being  different  from  those  payable  on  de- 
mand (Chit.  [9th  Ed.]  410),  should  be  presented  for' acceptance  within 
a  reasonable  time,  and  before  payment  thereof  be  demanded.  Chitty 
on  Bills  (10th  Ed.)  274;  Fernandez  v."  Lewis,  1  AlcCord  (S.  C.)  322. 
For  (sight  meaning  acceptance)  bills  payable  at  or  after  sight  do  not 
become  due  until  after  they  are  accepted,  or  protested  for  nonaccept- 
ance.  Brown  v.  Turner,  11  Ala.  752;  Chitty  on  Bills  (10th  Ed.)  272; 
Stephen's  N.  P.  875,  and  authorities  there  cited.  And,  after  accept- 
ance, it  is  now  well  settled  that  such  bills  are  entitled  to  days  of  grace. 
Chitty  on  Bills  (9th  Ed.)  marg.  pp.  409,  410;  Chit,  on  Bills  (10th  Ed.) 
marg.  pp.  376,  ^17,  and  note  T,  on  page  Zll  \  Bailey  on  Bills  (5th  Ed.) 
98;  Forbes  on  Bills,  142;  Janson  v.  Thomas.  B.  R.  Trinity  Term. 
24  Geo.  Ill;  Dixon  v.  Nuttall,  1  C,  M.  &  R.  307;  Dehers  v.  Harriot, 
1  Show.  163;  Coleman  v.  Sayer,  1  Barnard,  303;  Viner's  Ab.  tit.  "Bills 


228  PRESENTMENT  AND  NOTICE   OF    DISHONOR 

Ex.";  3  Dougl  421;  Selwyn's  N.  P.  (9th  Ed.)  351.  In  the  case  at 
bar,  then  the  presentment  for  payment  was  premature  and  a  nulhty. 
1  Mason,  176;  Wiffen  v.  Roberts,  1  Espinasse,  262;  Brown  v.  Harra- 
den,  4  Term  R.  148 ;  Griffin  v.  Goff,  12  Johns.  (N.  Y.)  423 ;  Savings 
Bank  v.  Bates,  8  Conn.  505 ;  Piatt  v.  Eads,  1  Blackf .  (Ind.)  87.  The 
authorities  cited  by  plaintiff  in  error,  showing  it  unnecessary  to  pro- 
test an  inland  bill,  to  authorize  a  holder  to  recover,  have  no  application. 
There  is  a  difference,  between  protest  and  notice. 

Dargan,  J.  This  was  an  action  of  assumpsit,  on  a  bill  of  exchange, 
drawn  by  the  defendant,  in  favor  of  the  plaintiff,  on  Desha  &  Smith, 
dated  the  26th  February,  1846,  payable  at  sight.  The  only  evidence 
introduced  to  charge  the  drawer  was  the  bill,  and  protest,  showing  a 
demand  of  payment  made  of  the  drawees,  on  the  4th  of  March,  1846, 
and  notice  to  the  drawer.  The  court  charged  the  jury  that  the  plain- 
tiff could  not  recover. 

A  bill,  payable  on  demand,  or  at  any  fixed  time,  need  not  be  pre- 
^nte.d  .loiL  acccp.tance ;  but  a  demand  of  payment,  at  the  time  the 
holdex  has  the  legal  right  to  demand  payment,  is  all  that  is  necessary. 
And  if  the  bill  be  not  paid,  the  holder  may  protest  it  for  nonpayment, 
ajid,  on  his  c,n\  iiig  due  notice  to  the  drawer  and  indorsers,  their  lia- 
bility is  fixed.  Evans  v.  Bridges,  4  Port.  348;  Bank  of  Washington 
V.  Triplett,  1  Pet.  25,  7  L.  Ed.  Z7  \  Townsley  v.  Sumrall,  2  Pet.  170, 
7  L.  Ed.  386;  Chitty  on  Bills  (10th  Ed.)  272.  But  when  the  time  of 
payment  is  uncertain  and  a  presentation  of  the  bill  is  necessary,  in^ 
order'to  ascertain,  and  fix,  the  time  of  payment,  as  if  the  bill  Be  pay- 
able at  a  number  of  days  after  sight,  then  the  bill  must  be  presented 
for  acceptance  before  payment  is  demanded.  Story  on  Bills,  §  112,'' 
227;  Chitty  on  Bills  (10th  Ed.)  272;  Bayley  on  Bills  (5th  Ed.)  217, 
218. 

It  is  contended  that  a  bill  payable  at  sight  is  entitled  to  days  of 
grace,  and  therefore  it  must  be  presented  for  acceptance  before  pay- 
ment can  be  demanded. 

I  am  free  to  confess  that  my  opinion,  untrammeled  by  authority, 
would  incline  me  to  hold  that  a  bill  of  exchange,  payable  at  sight, 
is  not  entitled  to  days  of  grace,  and  that  payment  may  be  demanded 
on  presenting  the  bill,  which,  if  refused,  would  authorize  the  holder 
forthwith  to  have  it  protested  for  nonpayment,  and,  on  giving  notice 
to  the  drawer,  to  hold  him  liable.  But  the  law  seems  to  be  settled 
otherwise.  Judge  Story,  in  his  treatise  on  Bills,  says  "tjiatdays  of 
grace  are  allowed  on  all_bills,  whether  payable  at  a  certain  time  after' 
date,  after  sight,  or  even  at  sight;  and  although  there  has  been  some 
diversity  of  opinion  whether  bills  payable  at  sight  are  entitled  to  days 
of  grace,  it  is  now  settled  by  the  decisions,  both  in  England  and  Ameri- 
ca, that  days  of  grace  are  allowable  on  such  bills."  Section  342,  p. 
429.  To  the  same  effect,  see  Chitty  on  Bills  HOth  Ed.)  376;  Bayley  on 
Bills  (5th  Ed.)  244,  245;  Selwyn's  N.  P.  (9th  Ed.)  351;  Coleman  v. 


PRESENTMENT 


229 


Sayre,  1  Barnard,  303;  Dehers  v.  Harriet,  1  Show.  165;  Stephen's 
N.  P.  876.  Under  the  influence  of  these  authorities,  I  feel  constrained 
to  hold  that  a  bilLp^yable  at^  sight  is  entitled  to  days  of  grace ;  con- 
sequently.  a  demand  of  payment  made  of  the  drawer,  upon  the  first 
presentation  of  the  bill  to  him,  is  insufficient  to  charge  the  drawer,  for^ 
the  bill  is  not  then  due.  As  there  was  no  evidence  of  any  previour 
pTesehtation  of  the  bill  for  acceptance,  nor  notice  given  of  nonaccept- 
ance7the  demand  of  payment  was  prematurely  made,  and  was  there- 
fore a  nttllit}'. 

As  the  evidence  fails  to  show  a  demand  of  payment  on  the  day  the 
bill  was  payable,  the  court  correctly  instructed  the  jury  that  the  plain- 
tiff could  not  recover. 

Let  the  judgment  be  affirmed. 


GIFFORD  V.  HARDELU 

(Supreme  Court  of  Wisconsin,  1S94.     88  Wis.  538,  60  N.  W.  1064,  43  Am.  St. 

Rep.  925.) 

This  action  was  brought  to  recover^  against  th£_defendant,  as  in- 
dorserTthe  amount  of  four  checks  drawn  on  the  Commercial  Bank  of 
Milwaukee  by  one  Musselman,  in  favor  of  divers  persons,  and  which 
had  been  indorsed  to  the  defendant,  who  on  the  17th  of  July,  1893,  sold 
and  indorsed  them  to  the  plaintiff.  They  were  indorsed  and  delivered 
to  the  plaintift''s  father,  at  Dousman,  Waukesha  county.  Wis.,  who  at 
once  mailed  them  to  the  plaintiff,  at  New  Richmond,  Wis.  The  checks 
were  not  presented  for  payment  until  the  21st  of  July,  when  the  Com- 
mercial Bank  had  failed,  and  were  protested  for  nonpayment. 

The  only  question  was  whether  the  g^laintift',  or  his  agent,  the  jNlanu- 
facturers'  Bank  of  New  Richmond,  Wis.^which  undertook  the  collec- 
tion of  the  checks,  used  due  diligence  in  presenting  them  for  payment.^^ 
They  were  forwarded  to  the  plaintiff,  at  New  Richmond,  by  his  father, 
on  the  day  they  were  indorsed,  and  received  by  him,  by  due  course  of 
mail,  July  18th,  at  5  o'clock  p.  m.,  and  were  at  once  delivered  to  said 
Manufacturers'  Bank  for  collection.  It  immediately  inclosed  and 
mailed  the  checks  to  its  bank  correspondent  in  Chicago  for  collection, 
according  to  its  usual  custom,  having  no  regular  bank  correspondent  in 
Milwaukee.  They  were  received  and  forwarded  by  the  National  Bank 
of  Illinois,  of  Chicago,  to  Milwaukee,  Wis.,  but  were  not  presented 
for  payment  until  the  21st  of  July.  The  Commercial  Bank  of  ]\Iihvau- 
kee,  upon  which  they  were  drawn,  failed,  closing  its  doors  at  the  usual 
hour  on  the  20th  of  July.  There  was  a  direct  mail  route  from  New 
Richmond  to  IMilwaukee,  and  thence  to  Chicago,  the  latter  city  being 
about  85  miles  south  of  Milwaukee.  The  evening  mail  of  the  ISth  of 
July  at  this  time  left  New  Richmond  at  8  :41  p.  m.,  and  would  have 
reached  Milwaukee  at  11  o'clock  in  the  forenoon  of  the  19th,  and  Chi- 


230  PRESENTMENT  AND   NOTICE  OF    DISHONOR 

cage  at  about  1  o'clock  of  the  same  day;  and  the  checks  arriving  at 
IMihvaukee,  as  above  stated,  could  have  been  presented  for  payment 
at  10  o'clock  in  the  morning  of  the  20th,  while  the  bank  on  which  they 
were  drawn  was  honoring  its  checks.  The  court  held  that  sending 
them  by  way  of  Chicago  for  collection  was  not  the  use  of  reasonable 
diligence  in  presenting  them  for  payment,  and  directed  a  verdict  for 
the  defendant,  and  from  a  judgment  thereon  in  favor  of  the  defend- 
ant the  plaintiff  appealed. 

PiNNEY,  J.  (after  stating  the  facts  as  above).  The  same  rules  which 
exist  in  relation  to  Jlie  necessity  of  presentment  and  notice,  in  order 
to  charge  the  indorser  of  bills  of  exchange  in  general,  apply  as  well  to  ._ 
an  indorser  of  a  check.  A  check  on  a  bank  is  presumed  to  be  drawn 
agamsOeposited  funds,  and,  unlike  a  bill  of  exchange,  which  need 
not  be  drawn  on  a  deposit,  is  generally  designed  for  immediate  pay- 
ment, and  not  for  circulation.  For  this  reason  it  is  of  greater  impor- 
tance than  in  the  case  of  a  bill  that  a  check  shall  be  promptly  present- 
ed, and  the  drawer  notified  of  nonpayment,  so  that  he  may  speedily 
inquire  into  the  cause  of  refusal,  and  take  prompt  measures  to  secure 
his  funds  deposited  in  the'  bank.  The  indorsers  of  bills  and  of  checks 
stand  on  the  same  footing  in  reference  to  the  effect  of  delay  or  failure 
in  making  presentment,  or  giving  notice  of  nonpayment,  and  are  ab- 
solutely and  entirely  discharged  if  presentment  be  not  made  within  a 
reasonable  time;  and  this  rule  applies  as  between  an  indorser  and  in- 
dorsee, as  in  the  present  case. 

It  is  plain  from  the  facts  that,  if  the  bank  at  New  Richmond  had^ 
forwarded  the  checks  direct  to  Milwaukee  for  collection,  the,y  would 
have  been  received,  at  the  furthest,  in  time  for  presentation  and  pay- 
ment on  the  20th  of  July,  and  while  the  bank  on  which  they  were 
drawn  was  transacting  its  usual  business;  and  it  appears  that  it  had 
ample  funds' of  the  drawer,  with  which  to  have  paid  them.  The  period 
of  reasonable  time  for  presentation,  as  between  the  plaintiff'  and  the 
defendant,  as  indorser,  undoubtedly  began  when  the  checks  were  de- 
livered to  the  plaintiff's  father  for  him,  at  Dousman,  Waukesha  coun- 
ty, Wis.,  on  the  17th  of  July.  Daniel,  Neg.  Inst.  §§  1586,  1587,  and 
cases  in  notes.  The  drawer  of  a  check  cannot  rightfully  withdraw  his 
funds  necessary  for  the  payment  of  it  upon  proper  presentation,  and 
it  would  be  unjust  to  hold  that,  however  long  the  holder  might  permit 
the  fund  to  remain,  it  should  be  at  the  drawer's  risk.  Hence,  the  check 
must  be. presented  within  a  reasonable  time^  or  the  indorser  will  be 
discharged,  and  the'fund  is  at  the  risk  of  the  hofder,  if  he  permits  the 
deposit  to  remain.  "No  transfer,  or  series  of  transfers,  can  prolong 
the  risk  of  the  dra.w.er_gr_indorser  beyond  this  period,  though  each  par- 
ty is  allowed  the  same  periodTaT^tween  himself  and  his  immediate 
predecessor^  that  tlie  payee  had,  as  between  himsell  and  the  drawer ; 
for  no  transferee  can  stand  on  any  better  footing  than  his  transferrer, 
in  respect  to  the  time  within  which  the  check  must  be  presented  in 
order  to  render  the  drawer's  or  previous  indorser's  liability  absolute  in 


PRESENTMENl 


2:n 


the  event  of  the  failure  of  the  bank.     Daniel,  Ncg.  Inst.  §  1595,  and 
cases  in  note. 

The  rule  of  diligence,  as  between  indorsee  and  indorscr,  is  the  same 
as  betweeri  payee' and  drawer.  This  requires,  in  general,  that,  where 
the  payee  receivesTlie  check  from  the  drawer  in  a  place  distant  from 
the~ place  where  the  banTc  on  \vliich  it  is  drawn'fs  located,  it  will  be  suf- 
ficient for  him  to  forward  it  by  i)ost  to  some  person  at  the  latter  place 
onllie  next  secular  day  after  it  is  received,  and  then'  it  will  be  sufficient 
for  the  personto  whom  it  is  thus  forwarded  to  present  it  for  payment 
on  the  day  after  it  has  reached  him  by  due  course  of  mail.  When  the 
defendant  delivered  the  checks,  properly  indorsed,  at  Dousman,  Wis., 
on  the  17th  of  July,  he  had  a  ri.-ln  t^  assume  and  expect  that  the  plain- 
tiff, or  his  father,  would'present  them  for  payment  within  a  reasonable 
time,  and. they  took  the  risk  of  making  such  presentment.  Instead,  they 
were  sent  several  hundred  miles  to  the  northwest  of  Milwaukee,  to 
New  Richmond,  and  then  back,  through  Milwaukee,  to  Chicago,  and 
were  then  returned  to  Milwaukee  for  payment  on  the  21st,  as  before 
stated.  It  is  clear  that  they  were  not  presented  for  payment  within 
a  reasonable  time  after  indorsement  and  delivery  by  the  defendant,  and 
thejudgrnent  of  the  county  court  was  therefore  correct.  First  Nat. 
Bank  V.  Miller,  37  Neb.  500,  55  N.  W.  1064,  40  Am.  St.  Rep.  499,  and 
cases  cited. 

The  judgment  of  the  county  court  is  affirmed. 


GRANGE  V.  REIGH  et  al. 

(Supreme  Court  of  Wisconsin,  1S96.    93  Wis.  552,  67  N.  W.  1130.) 

On  the  20th  day  of  July,  1893,  defendants  were  indebted  to  plain- 
tiff in  the  sum  of_^$l,2U.  After  banHng  hours  on  that  day,  in  the  city 
of  Milwaukee,  Where  plaintiff  resided,  defendants  gave  him  a  check 
for  the  amount  of  Fuch  indebtedness  on  the  South  Side  Savings  Bank, 
located  in  said  city.  Such  check  was  not  presented  for  payment  either 
on  that  or  the  succeeding  day,  July  21st.  The  bank  was  open  for  busi- 
ness all  of  such  succeeding  day,  and  would  have  paid  the  check  had  it 
been  presented  during  that  time.  The  bank  did  not  open  for  business 
after  the  21st,  by  reason  of  which  the  check  was  not  paid.  This  action 
is  to  recover  the  amount  of  the  check  from  the  drawers.  The  circuit 
court  decided  that,  because  of  the  failure  to  present  the  check  for  pay- 
ment to  the  bank  within  a  reasonablo  time,  recourse  upon  the  drawers 
was  lost;  and  accordingly  juil,L;incnt  was  rendered  for  the  defendants, 
and  plaintiff  appealed. 

Marshall,  J.  (after  stating  the  facts  as  above).  The  settled  law 
applicable  to  the  facts  of  this  case  is  that,  if  a  person  receives  a  check 
on  a  bjuik,  he  must  present  it  Jor jQayment  within  a  reasonable  time,  in 
order  to  preserve  his  right  of  recourse  on  the  drawer  in  case  of  non- 


232  PRESENTMENT  AND  NOTICE   OF   DISHONOR 

payment  by  the  drawee;  and  that,  when  such  person  resides  and  re- 
ceiveFthe  check  at  the  same_  place  where  such  bank  is  located,  a  rea- 
sonable  time  for  such  presentation  reaches,  at  the  latest,  only  to  the 
close  of  banking  hours  on  the  succeeding  day,  excluding  Sundays  and 
holidays.  Tiedeman  Com.  Paper,  §  443 ;  2  Daniel,  Neg.  Inst.  §  1590, 
1591,  and  cases  cited;  Lloyd  v.  Osborne,  92  Wis.  93,  65  N.  W.  859. 
Plaintiff  failed  to  con  jjly  with  the  law  in  this  respect;  hence  defend- 
ants were  discharged  from  all  liability  to  answer  for  the  default  of  the 
bank.    Such  was  the  decision  of  the  trial  court,  and  it  must  be  affirmed. 


GORDON  V.  LEVINE. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk,  1907.     194  Mass.  418,  80 
N.  E.  505,  10  L.  R.  A.  (N.  S.)  1153,  120  Am.  St.  Rep.  565,  10  Ann.  Cas.  1119.) 

Morton,  J.    This  is  an  action  upon  a  check  by  the  plaintiff  as  payee 
against  the  defendant  as  drawer.    The  check  was  dated  December  30, 
1905,  which  was  Saturday,  though  there  was  some  question  whether 
it  was  actually  drawn  and  delivered  on  that  day,  or  the  31st.     The 
plaintiff*  is  described  in  the  writ  as  of  Chelsea  and  the  defendant  as  of 
Boston.    The  bank  on  which  the  check  was  drawn  was  in  Boston  and 
the  check  was  drawn  and  delivered  there.     The  plaintiff  testified  that 
the  defendant  asked  him  not  to  present  the  check  for  a  couple  of  days 
as  he  did  not  have  sufficient  funds  to  meet  it,  but  that  he  presented  it 
Monday  morning,  January  1st,  and  was  told  there  were  no  funds;  and 
that  he  went  to  see  the  defendant  at  his  place  of  business  but  did  not 
see  him.    The  plaintiff  also  testified  that  in  the  afternoon  of  the  same 
day  he  passed  the  check  to  one  Saievitz  in  payment  of  a  bill  which  he 
owed  him,  receiving  the  balance  in  cash.     And  there  was  testimony 
tending  to  show  that  on  the  next  day  Saievitz  indorsed  it  to  one  Root- 
stein  who  deposited  it  on  January  4th,  in  the  Faneuil  Hall  National 
Bank,  in  Boston,  for  collection,  and  that  that  bank's  messenger  went 
with  it  on  the  afternoon  of  the  following  day,  Friday,  January  5th,  to 
the  bank  on  which  it  was  drawn,  the  Provident  Securities  &  Banking 
Company,  and  found  its  doors  closed.    The  plaintiff  also  testified  that 
he  told  the  defendant  the  banlc  had  failed  and  that  the  defendant  prom- 
ised to  make  the  check  good.    The  defendant  denied  this,  and  also  the 
plaintiff's  statement  that  he  had  asked  the  plaintiff  not  to  present  the 
check  for  a  couple  of  days,  and  introduced  testimony  tending  to  show 
that  at  the  time  when  the  check  was  drawn  he  had  sufficient  funds  on 
deposit  at  the  bank. to  meet_it,  and  continued  to  have  down  to_the_faiL. 
ure  of  the  bank.     It  was  admitted  that  the  bank  failed  on  Friday, 
January  5th,  and  the  defendant  introduced  evidence  tending  to  show 
that  he  had  received  no  payment  or  dividend  on  account  of  his  deposit. 
There  was  a  verdict  for  the  plaintiff  and  the  case  is  here  on  exceptions 


PRESENTMENT  233 

by  the  defendant  to  the  refusal  of  the  judge  to  give  certain  instruc- 
tions that  were  requested,  and  to  the  admission  of  certain  testimony. 

The  defendant,  in  substance,  asked  the  judge  to  instruct  the  jury 
that  a  check  must  be  prcsjcjuted  for  paxment  in  a  reasonable  time  and 
jthat  in  nuKr  tu  li.i\c  bceu -presented  within  a  reasonable  time  the 
check  iji  suit  should  have  been  presented  before  the  close  of  banking 
hours  on  Monday;  that  its  transfer  to  successive  holders  would  not 
extend  the  time  for  presentment,  and  a  presentment  on  January  5th 
would  not  be  within  a  reasonable  time  and  if  the  bank  failed  in  the 
meantime  and  the  defendant  sustained  a  loss  in  consequence  of  delay 
in  presenting  the  check,  he  would  be  discharged  from  liability  to  that 
extent.  The  judge  gave  in  part  the  instruction  thus  requested,  and  re- 
fused it  in  part.  He  instructed  the  jury  that  the  check  must  have  been 
presented  for  payment  within  a  r_easonable  time,  and  that  if  it  was  pre- 
sented  on  MDUilax.that  would  be.within  a  reasonabre"time.  But  he  re- 
fused to  instruct  the  jury  that  the  transfer  to  successive  holders  would 
not  extend  the  time,  or  that  a  presentment  on  Friday  was  not  within  a 
reasonable  time.  On  the  contrary  he  instructed  them  that  "the  court 
had  occasion  to  consider  that  in  one  case  in  this  commonwealth  (refer- 
ring, we  assume  to  Taylor  v.  Wilson,  11  Mete.  44,  45  Am.  Dec.  ISO); 
and  it  is  there  stated  that  a  check  may  also  be  passed  from  hand  to 
hand  and  a  reasonable  time  is„  allowe4  to  each  party  receiving  the  same  . 
to  presein  It  for  payment."  And  after  calling  their  attention  to  the 
provisions  of  the  statute  (Rev.  Laws,  c.  72>,  §  209)  that  in  considering 
what  a  reasonable  time  is  "regard  is  to  be  had  to  the  nature  of  the  in- 
strument, the  usage  of  trade  or  business,  if  any,  with  respect  to  such 
instruments,  and  the  facts  of  the  particular  case,"  left  it  to  them  to  de- 
termine whether  the  check  was  presented  on  Monday,  or,  if  they  were 
not  satisfied  that  it  was,  then  to  determine  whether  if  it  passed,  from 
hand  to  hand  and  each  one  had  a  reasonable  time  to  present  it  the  pre- 
sentment on  Friday  was  within  a  reasonable  time.  For  aught  that  ap- 
pears the  jury  may  not  have  been  satisfied  that  the  check  was  presented 
on  Monday  and  may  have  found  for  the  plaintiff  on  the  ground  that 
the  presentment  on  Friday  was  within  a  reasonable  time.  The  ques- 
tion is  therefore  distinctly  raised  whether  a  presentment  on  Friday 
could  have  been  found  to  be  within  a  reasonable  time. 

The  general  rule  is  as  was  stated  by  the  judge  and  as  is  provided  in 
the  negotiable  instruments  act  (Rev.  Laws,  c.  7Z,  §  203)  that  a  check 
nmst  be.presented, for  payment,  within. a... reasonable.. time  after  it  ir 
issued.  If  it  is  not  so  presented  and  the  drawer  sustains  a  loss  by  rea- 
soji_of  the  failure  of  the  drawee_he  will  be  discharged  from  liability  to 
the  extent  of  such  loss,  continuing  liable  otherwise.  This  results  from 
the  nature  of  the  instrument  which  though  defined  in  the  negotiable 
instruments  act  (Rev.  Laws,  c.  73,  §  202)  as  "a  bill  of  exchange  drawn 
on  a  bank  payable  on  demand"  is  intended  for  immediate  use  (Mussey 
V.  Eagle  Bank,  9  Mete.  306,  314)  and  not  to  circulate  as  a  promissory 
note,  and  it  consequently  would  be  unjust  to  subject  the  drawer  to  the 


234  PRESENTMENT  AND   NOTICE   OF   DISHONOR 

loss  if  any  resulting  from  failure  to  present  it  for  payment  within  a 
reasonable  time.  What  is  a  reasonable  time,  however,  still  remains  for 
consideration.  The  negotiable  instruments  act  provides  generally  (Rev. 
Laws,  c.  73,  §  209)  as  the  judge  said  that  "in  determining  what  is  a 
'reasonable  time'  or  an  'unreasonable  time'^  regard  is  to  be  had  to  the 
najure  of  the  instrument,  the  usage  of  trade  or  business,  if  any,  with 
respect  to  such  instrumejits  and  the  facts  of  the  particular  case."  This, 
however,  would  not  seem  to  lay  down  or  to  establish  any  new  rule. 
The  nature  of  the  instrument  and  the  facts  of  the  particular  case  have 
always  been  considered  in  passing  upon  the  question  of  reasonable 
or  unreasonable  time.  In  deciding,  therefore,  whether  this  check  was 
presented  within  a  reasonable  time,  if  presented  on  Friday,  resort  must 
be  had  to  the  rules  which  have  been  hitherto  established  in  similar 
cases.  And  one  of  the  rules  which  has  been  established  is  that  where 
the  drawer  and  drawee  and  the  payee  are  all  in  the  same  city  or  town 
a  check  to  be  presented  within  a  reasonable  time_should  be  presented  at 
some  time  before  the  close  of  banking  hours  on  the  day  after  it  is 
issued  and  that  its  circulation  from  hand  to  hand  will  not  extend  the 
time  of  presentment  to  the  detriment  of  ..the  drawer.  If  it  is  presented 
and  paid  afterwards  the  drawer  suffers  no  harm.  But  if  not  presented 
within  the  time  thus  fixed,  and  there  is  a  loss  it  falls  not  on  him  but 
on  the  holder.     *     *     * 

The  case  of  Taylor  v.  Wilson,  11  Mete.  44,  45  Am.  Dec.  180,  rehed 
on  by  the  plaintiff,  was  a  case  where  a  check  was  drawn  by  one  doing 
business  in  Charlestown  and  living  in  Roxbury  on  a  bank  in  Charles- 
town  in  favor  of  a  resident  of  Newport.  The  check  was  dated  Sep- 
tember 30,  1842,  which  was  Friday,  and  was  received  by  the  payee 
Saturday  evening,  October  1st.  On  Tuesday,  October  4th,  having 
been  previously  cashed  for  the  payee  by  a  local  bank,  it  was  given  by 
the  cashier  of  that  bank  to  a  messenger  to  be  carried  to  the  Merchants' 
Bank  at  Providence  in  the  usual  course  of  remitting  its  funds  and  se- 
curities and  was  received  by  that  bank  on  Wednesday  and  sent  by  its 
cashier  to  the  Suffolk  Bank  at  Boston.  That  bank  received  it  on  the 
next  day  (October  6th)  and  presented  it  on  the  same  day  to  the  bank 
on  which  it  was  drawn  and  payment  was  refused ;  the  bank  having 
closed  its  doors  on  Monday  morning,  October  3d,  and  being  insolvent. 
The  case  was  submitted  to  the  court  on  agreed  facts  with  power  to 
draw  inferences  and  the  court  found  in  favor  of  the  payee  and  against 
the  drawer.  The  court  held  in  effect  that  under  the  circumstances 
there  had  been  no  laches  and  that  the  check  had  been  presented  within 
a  reasonable  .time.  There  is  a  sentence  in  the  opinion  to  the  effect  that 
a  check  may  pass  from  hand  to  hand  and  that  a  reasonable  time  is 
allowed  to  each  party  receiving  it  to  present  it  for  payment  and  the 
case  has  been  cited  to  that  point  with  approval  in  Veazie  Bank  v.  Winn, 
40  Me.  60.  But  we  do  not  think  that  the  court  meant  to  lay  down 
the  rule  that  under  any  and  all  circumstances  each  party  receiving  a 
check  from  a  previous  holder  was  entitled  to  a  reasonable  time  to 


PRESENTMENT  235 

present  it  for  payment,  or  that  the  case  required  that  it  should  lay 
down  such  a  rule.  On  the  contrary  the  court  expressly  said  that  a 
party  receiving  a  check  was  not  guilty  of  laches  if  he  did  not  present 
it  on  "the  samc^Tlay  on  whichjt  was  drawn,  but  was  allowed  a  reasona- 
Cle  time  for~thaL  i'Uij^-ose,  and  that  the  next  day  was  held  to  be  such 
reasonable  time.  The  decision  should  be  liniitnl  lo  the  case  before  the 
court  which  was  that  of  a  check  drawn  on  a  bank  in  one  place  and  sent 
to  a  payee  in  another  place  at  considerable  distance  and  forwarded  for 
presentment  in  the  usual  course  of  business,  and,  so  understood  and 
applied,  was  correct.  It  follows  from  what  has  been  said  that  the  ex- 
ceptions nmst  be  sustained.  The  conclusion  to  which  we  have  come  on 
the  principal  question  renders  it  unnecessary  to  consider  the  questions 
of  evidence,  though  we  may  observe  that  we  see  no  error  in  regard  to 
them. 

Exceptions  sustained. 


COLUMBIAN  BANKING  CO.  v.  BOWEN. 
(Supreme  Court  of  Wisconsin,  190S.     134  Wis.  218,  114  N.  W.  451.) 

Appeal  from  Barron  county  circuit  court. 

June  10,  1903,  the  banking  firm  known  as  the  Farmers'  &  Mer- 
chants' Bank,  of  Bangor,  Wis.,  sold  to  the  defendant  a  $400  draft, 
drawn  in  the  usual  form,  dated  on  that  day,  payable  to  defendant's  or- 
der, and  drawn  by  such  firm  on  the  National  Bank  of  North  America, 
at  Chicago,  111.  The  draft  was  sent  to  the  defendant  at  Barron,  Wis., 
and  was  indorsed  by  him  to  A.  R.  Tabbert,  to  whom  it  was  forwarded 
by  mail,  at  Spokane,  Wash.,  June  16,  1903,  and  was  there  received 
by  him  June  20th  thereafter.  He  was  at  Spokane  temporarily  and 
was  on  his  way  to  the  city  of  San  Francisco,  Cal.  July  14,  1903,  he 
indorsed  the  draft  and  sold  the  same  to  the  plaintiff  at  such  city,  re- 
ceiving $400  therefor.  On  that  day,  in  due  course,  plaintiff  sent  the 
draft  by  mail  to  the  Bankers'  National  Bank,  of  Chicago,  111.,  by  which 
it  was  received  July  18th  thereafter,  and  was  then,  as  requested,  duly 
presented  to  the  drawee  for  payment,  which  was  refused,  whereupon 
it  was  duly  protested  for  nonpayment  by  a  duly  authorized  notary  pub- 
lic, who  forwarded  a  manifest  thereof  with  notices  of  protest  for  A. 
R.  Tabbert,  the  plaintiff  and  the  defendant,  to  the  plaintiff  at  San 
Francisco,  Cal.,  and  also  sent  due  notice  to  the  National  Bank  of  North 
America  at  Chicago,  111.,  and  to  the  drawer  at  Bangor,  Wis.,  July  19, 
1903.  Plaintiff  upon  receipt  of  the  manifest  and  notices  duly  sent  the 
one  for  defendant  to  him  at  Barron,  Wis.,  by  whom  it  was  duly  re- 
ceived, and  sent  the  one  for  Tabbert  by  mail  to  his  post  office  address 
and  reputed  place  of  residence,  that  being  San  Francisco,  Cal.  There- 
after due  demand  was  made  on  defendant  for  payment  of  the  draft, 
and  the  same  was  refused.  July  28,  1903,  the  property  of  the  drawer 
was  placed  in  the  possession  of  a  receiver,  who  duly  paid  upon  the 


236  PRESENTMENT  AND   NOTICE   OF    DISHONOR 

draft  $144.49,  January  6,  1904,  $61.93,  May  20th  thereafter,  and 
$30.96,  June  5th  following.  Plaintitf  was  the  owner  of  the  draft  at  the 
time  of  the  commencement  of  the  action,  and  at  the  time  of  the  trial 
thereof  there  was  due  thereon  $210. 

The  pleadings  presented  issues  for  decision  involving  facts  as  above 
detailed.  The  case  was  tried  by  the  court  resulting  in  findings  of  fact 
in  accordance  with  the  statement,  and  a  conclusion  of  law  that  plaintiff 
became  the  owner  of  the  draft  in  due  course,  and  was  entitled  to  judg- 
ment for  $210,  with  costs.    Judgment  was  accordingly  rendered. 

Marshall,  J.  (after  stating  the  facts  as  above).  Counsel  for  appel- 
lant have  presented  quite  an  extended  argument,  referring  to  many  au- 
thorities, as  to  the  law  antedating  and  independently  of  the  negotiable 
instrument  statute  (Sanborn's  St.  Supp.  1906,  §§  1675  to  168^1 — 6; 
chapter  356,  p.  681,  Laws  1899)  to  support  the  proposition,  that  appel- 
lant was  released  from  liability-  on  the  instrument  in  question,  because 
of  the  period  intervening  between  his  parting  therewith  and  the  pres- 
entation thereof  to  the  drawee  for  payment.  Such  statute  was  enacted 
for  the  purpose  of  furnishing,  in  itself,  a  certain  guide  for  the  deter- 
mination of  all  questions  covered  thereby  relating  to  commercial  paper, 
and,  therefore,  so  far  as  it  speaks  without  ambiguity  as  to  any  such 
question,  reference  to  case  law  as  it  existed  prior  to  the  enactment  is 
unnecessary  and  is  liable  to  be  misleading. 

The  negotiable  instrument  law  is  not  merely  a  legislative  codifica- 
tion of  judicial  rules  previously  existing  in  this  state  making  that  writ- 
ten law,  which  was  before  unwritten.  It  is,  so  far  as  it  goes,  an  in- 
corporation into  written  law  of  the  common  law  of  the  state,  so  to 
speak,  the  law  merchant  generally  as  recognized  here,  with  such 
changes  or  modifications  and  additions  as  to  make  a  system  harmoniz- 
ing, so  far  as  practicable,  with  that  prevailing  in  other  states.  That  it 
contains  some  quite  material  changes  in  previous  rules  governing  com- 
mercial paper  we  have  had  occasion  heretofore  to  point  out.  Hodge  v. 
Smith,  130  Wis.  326,  110  N.  W.  192;  Aukland  v.  Arnold,  131  Wis. 
64,  111  N.  W.  212. 

The  primary  question  discussed  by  appellant's  counsel,  it  is  believed 
is  fully  covered  by  the  negotiable  instrument  law.  There  are  a  multi- 
tude of  decisions  regarding  the  character  of  a  bill  of  exchange  and  that 
of  a  check,  as  those  terms  are  used  in  business  transactions,  and  to' 
what  extent  the  incidents  of  one  are  identical  with  those  of  the  other, 
which  decisions  are  so  variant  in  their  phrasing  of  the  matter  as  to 
produce  more  or  less  confusion  in  respect  thereto  with  many  apparent, 
and  some  real,  conflicts,  to  remedy  which  was  one  of  the  principal  ob- 
jects of  the  law. 

To  that  end  it  was  provided  in  section  1680,  "A  bill  of  exchange  is 
an  unconditional  order  in  writing  addressed  by  one  person  to  another, 
signed  by  the  person  giving  it,  requiring  the  person  to  whom  it  is  ad- 
dressed to  pay  on  demand  or  at  a  fixed  or  determinable  future  time  a 
sum  certain  in  money  to  order  or  bearer,"  and  it  was  further  provided 


PRESENTMENT  2^7 

in  section  168^1 — 1,  "A  check  is  a  bill  of  exchange  drawn  on  a  bank, 
payable  on  demand."  ~~  — 

""As  to  whether  the  incidents  of  the  species  of  bills  of  exchange  last 
mentioned  are  the  same  as  those  of  bills  of  exchange  generally,  it  was 
further  provided  in  the  section  last  referred  to,  "Except  as  herein  oth- 
erwise provided,  the  provisions  of  this  act  applicable  to  a  bill  of  ex- 
change payable  on  demand  apply  to  a  check."  The  only  exception  re- 
ferred to  material  to  this  case  is  contained  in  section  168-1 — 2,  in  these 
words :  "A  check  must  be  presented  for  payment  wiUiin  a  reasonable 
time  after  its  issue  or  the  drawer  will  be  discharged  from  liability 
thereon  to  the  extent  of  the  Iqs^caused  byjhe  delay." 

Keeping  in  mincTthat  the  discharge  from  liability  above  referred  to 
because  of  unreasonable  delay  after  the  issuance  of  a  check  in  present- 
ing it  for  payment,  is  of  the  drawer  only,  and  that  this  action  is  against 
the  payee  who  indorsed  the  instrument  in  question  without  qualifica- 
tion and  put  it  in  circulation,  we  turn  to  section  1678 — 1,  which  pro- 
vides, as  to  a  bill  of  exchange  payable  on  demand,  which  from  the  fore- 
going obviously  includes  a  check  or  draft  on  a  bank  of  the  character 
of  the  one  in  question,  "presentment  for  payment  will  be  sufficient  if 
made  within  a  reasonable  time  after  the  last  negotiation  thereof." 

From  the  foregoing  it  seems  plain  that  as  regards  the  payee  of  such 
an  instrument  as  we  have  here,  who  puts  the  same  in  circulation  with 
his  unqualified  indorsement  thereon,  and  all_subsequent  parties  thereto 
so  indorsing  the  same,  jDresentment  for  payment  is  sufficient,  as  regards 
their  liability,  if  made  witlnn  a  reasonable  time  after  the  last  negotia-" 
^tion.  A  bill  of  exchange  payable  on  demand,  regardless  of  its  char- 
acter, put  in  circulation,  so  long  as  its  circulating  character  is  preserved 
may  be  outstanding  without  impairing  the  liabihty  of  indorsers  thereof. 
Formerly  the  length  of  time  within  which  a  bill  of  exchange  might 
circulate  without  impairing  such  liability  was  more  or  less  uncertain, 
rendering  it  very  difficult  to  determine  any  one  case  by  the  decision 
in  another.  That  difficulty  was  removed,  so  far  as  practicable,  by  the 
provision  that  only  thejtime  need  be  considere_^  intervening  between  the 
last  ncQi'tia  iiMi  and  the  presentment.  That  is  recognized  as  a  radical 
change  in  the  law  as  it  formerly  existed.  Section  195,  Selover,  Neg. 
Inst.  Law. 

As  to  an  ordinary  bill  of  exchange  put  in  circulation,  it  was  quite 
anciently  held  that  the  period  between  July  18th  of  one  year  and  Jan- 
uary 16th  of  the  next  year  was  not  necessarily  unreasonable.  Gowan 
V.  Jackson,  20  Johns.  (N.  Y.)  176.  Perhaps  one  might  now  keep  a  bill 
of  exchange  for  such  length  of  time  as  to  destroy  its  circulating  char- 
acter notwithstanding  he  ultimately  passed  it  along  to  another  person, 
but  that  situation,  as  we  view  the  case,  does  not  exist  here. 

Applying  the  law  as  aforesaid  to  the  facts  of  this  case  it  is  readily 
seen  that  the  delay  in  presenting  the  paper  for  payment  between  its 
date  and  the  negotiation  to  the  bank  at  San  Francisco  is  immaterial. 
Appellant  miquairTiedly  indorsed  fKe  paper  and  put  it  in  circulation  by 


238  PRESENTMENT  AND  NOTICE  OF  DISHONOR 

sending  it  toTabberi;  at  a  distantj)art  of  the  country,  probably  know- 
ing  that  he  was  a  traveler.  Tabbert  received  the  paper  while  journey- 
ing  VvTth  the  intention  of  going  to  San  Francisco  and  held  it  till  he  ar- 
rived there  and  then  negotiated  it.  It  was  promptly  presented  for  pay- 
ment thereafter  and  so  in  time,  as  regards  that  circumstance,  to  pre- 
serve the  liability  of  appellant. 

The  court  decided,  as  indicated,  that  Tabbert  was  a  traveler  with 
San  Francisco  as  his  destination  and  properly  held  that  such  circum- 
stance sutticiently  explained,  if  any  explanation  were  necessary,  the 
lapse  of  time  between  his  reception  of  the  paper  and  his  negotiation 
thereof,  preserving  its  circulating  character  and  warranting  the  find- 
ing that  the  respondent  came  thereby  in  due  course. 

The  point  is  made  that  the  instrument  was  not  presented  to  the 
drawee  for  payment  during  banking  hours.  The  negotiable  instrument 
law  at  section  1678 — 2  provides  that  "Presentment  for  payment  to  be 
sufficient,  must  be  made :  *  *  *  at  a  reasonable  hour  on  a  busi- 
ness day.  *  *  *  "  The  evidence  shows  that  the  paper,  after  taking 
its  course  through  the  clearing  house,  was  presented  to  the  drawee  for 
payment  on  the  afternoon  of  the  same  day  between  the  hours  of  3  and 
6  o'clock.  The  proof  is  to  the  effect  tbat  such  was  the  customary  way 
of  doing^such  business  in  Chicago^  where  the  drawee  was  locaTedT" 
That  is,  as  we  understand  it,  that  the  business  day  of  the  bank  contin- 
ued after  the  closing  of  the  clearing  house  transactions  so  as  to  en- 
able banks  holding  paper  for  collection,  refused  recognition  in  such 
transactions,  to  present  the  same  for  payment  as  was  done  in  this  case. 
That  satisfies  the  statute.  What  constitutes  business  hours  of  a  bank, 
within  the  meaning  of  the  statute,  has  reference  to  the  general  custom 
at  the  place  of  the  particular  transaction  in  question.  In  case  of  a 
transaction  occurring  in  a  foreign  jurisdiction,  as  in  the  instance  in 
question,  the  court  cannot  take  judicial  notice  of  what  constitutes  rea- 
sonable hours  on  a  business  day.  1  Daniel  on  Neg.  Inst.  (5th  Ed.)  § 
601.  It  is  a  matter  of  proof,  though  in  case  of  the  notarial  certificate 
of  the  transaction,  as  here,  being  regular  so  as  to  furnish  prima  facie 
proof  that  the  paper  was  duly  presented  for  payment,  that  raises  the 
presumption  that  the  presentment  was  made  at  a  proper  time.  Cayuga 
County  Bank  v.  Hunt,  2  Hill  (N.  Y.)  635. 

Judgment  affirmed. 


COMMERCIAL  NAT.  BANK  OF  SYRACUSE  v.  ZIMMERMAN 

et  al. 

(Court  of  Appeals  of  New  York,  1906.     185  N.  T.  210,  77  N.  E.  1020.) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Fourth  Judicial  Department,  entered  June  5,  1905,  affirm- 
ing a  judgment  in  favor  of  defendant  Zimmerman,  entered  upon  a 
decision  of  the  court  on  trial  at  Special  Term. 


PRESENTMENT 


230 


The  plaintiff  brought  this  action  to  foreclose  a  Hen_oii certain  bonds 
of  ajailroaJ  conipajiyrwhlch  it  had  held  aT'collateral  security  for  the 
pajmentjof  a  note  of  the  defendant,  the  Syracuse  Construction  Com- 
pany71ndorsed  by  Joseph  Zimmerman,  and  to  recover  a  judgment  for 
any  deficiency,  arising  upon  the  sale  of  the  bonds,  against  Zimmer- 
man's estate.  The  note  reads  as  follows:  "$10,000.  Syracuse,  N.  Y., 
Sept.  16,  1899.  On  demand  after  date  we  promise  to  pay  to  the  order 
of  Joseph  Zimmerman  ten  thousand  dollars  at  Commercial  Bank. 
Value  received  with  interest.  Syracuse  Construction  Co.,  per  J.  S. 
Kaufmann,  Treas." 

Upon  the  trial  of  the  issue,  which  was  had  without  a  jury,  the  trial 
judge  found,  as  the  facts  of  the  case,  that  the  note  was  indorsed  by 
Zimmerman,  without  consideration  and  for  the  accommodation  of  the 
maker ;  that  on  September  20,  1899,  the  plaintiff  discounted  the  note 
for  the  maker,  the  defendant  construction  company,  receiving  the  bonds 
of  the  railroad  company  as  collateral  security  for  its  payment ;  that,  in 
January,  1903,  Zimmerman  died  intestate,  and  his  widow,  this  defend- 
ant, was  appointed  his  administratrix ;  that  on  April  9,  1903,  the  note 
was  presented  to  the  maker  for  payment  and,  payment  being  refused, 
was  duly  protested  for  nonpayment ;  that  "said  note  was  not  presented 
within  a  reasonable  time  after  it  was  issued~ana"That  sai  Jl!)laintiff  diH, 
not  demand  the  payment  thereof,  or  give  notice  of  the  dishonor  thereof, 
within  a  reasonable  time.'"'  Upon  these  facts,  he  reached  the  legal 
conclusion  that  the  plaintiff  was  entitled  to  enforce  a  lien  upon  the 
bonds  by  the  sale  thereof ;  but  that,  as  the  "presentment  of  said  note 
was  not  made  within  a  reasonable  time  after  the  discount,"  the  in- 
dorser,  Zimmerman,  and  his  estate  were  released  from  all  liability 
thereon.  Upon  the  plaintift"'s  appeal  from  so  much  of  the  judgment 
thereupon  entered,  as  adjudged  that  it  was  not  entitled  to  judgment 
against  the  estate  of  the  indorser  for  the  deficiency  upon  a  sale  of  the 
bonds,  the  Appellate  Division,  in  the  fourth  department,  by  a  unani- 
mous vote,  affirmed  the  judgment  as  rendered.  The  plaintiff  now  ap- 
peals to  this  court. 

Gray,  J.  (after  stating  the  facts  as  above).  The  only  question  of 
importance,  which  this  appeal  presents,  is  of  the  correctness  of  the  de- 
cision that  the  presentme:it  of  the  note  for  pa}'ment  had  not  been  made 
by  the  plaintiff  within  a  reasonable  time.  That  must,  necessarily,  turff 
upon  the  effect  of  the  enactment  of  the  provisions  of  the  negotiable 
instruments  law  of  1897.  Laws  1897,  p.  719,  c.  612.  Section  131,  p. 
736,  of  that  law  provides  that,  where  the  instrument  "is  payable  on 
demand,  presentment  must  be  made  within  a  reasonable  time  after  its 
issue,  except  that  in  the  case  of  a  bill  of  exchange,  presentment  for 
payment  will  be  sufficient  if  made  within  a  reasonable  time  after  the 
last  negotiation  thereof."  By  section  4,  it  provided  that  "in  determin- 
ing what  is  a  'reasonable  time,'  or  an  'unreasonable  time,'  regard  is  to 
be  had  to  the  nature  of  the  instrument,  the  usage  of  trade  or  business 


240  PRESENTMENT  AND  NOTICE  OF  DISHONOR 

(if  any)  with  respect  to  such  instruments,  and  the  facts  of  the  particu- 
lar case." 

Prior  to  this  legislative  enactment,  the  decision  of  this  court  in  Mer- 
ritt  V.  Todd,  23  N.  Y.  28,  80  Am.  Dec.  243,  was  regarded  as  having 
settled  the  rule  of  law  applicable  to  the  determination  of  such  cases. 
In  that  case,  the  note  was  payable  on  demand,  with  interest,  and  the 
question  arose  as  to  the  continuance  of  the  indorser's  liability,  where 
three  years  had  intervened  between  the  making  and  presentment  for 
payment.    Chief  Judge  Comstock,  with  the  concurrence  of  the  majority 
of  the  judges,  undertook  to  resolve  what  he  regarded  as  the  existing 
uncertainty,  as  to  the  rule,  which  conflicting  decisions  had  brought 
about,  by  referring  the  interpretation  of  the  contract  to  the  adoption 
of  one  of  two  principles.    By  the  one  principle,  a  promissory  note,  pay- 
able on  demand  with  interest  and  indorsed,  is  to  be  regarded  as  a  con- 
tinuing security  and  no  dishonor  attaches  until  payment  is  required  and 
refused.     By  the  other,  or  opposing,  rule  the  holder,  if  he  wishes  to 
charge  the  indorser,  must  make  his  demand  of  the  maker  without 
delay.     Judge  Comstock  finds  no  intermediate  ground  to  stand  upon 
and  holds  "that  questions  of  this  kind  ought  to  be  determined  accord- 
iOS.  to,Qil£-9i-JJbe  two  rules,  which  have  been  mentioned  ;  in  other  words, 
that  the  demandmay  be  made  in  due  season__at  any  time  so  as  to^ charge 
the  indorser,  or  else  that  he  is  discharged  unless  it  bejmade  with  due' 
diligence,  m  the  gen^riil  sense  of  the  commercial  law.     Between  these 
alternatives,  we  are  to  select  the  one  which  will  best  harmonize  with 
the  language  of  the  contract  and  the  intention  of  the  parties.    A  de- 
mand note  may  be  payable  with  or  without  interest.    If  the  security  be 
not  on  interest,  it  may  be  a  fair  exposition  of  the  contract  to  hold  that 
no  time  of  credit  is  contemplated  by  the  indorser,  and  that  the  demand 
should  be  made  as  quickly  as  the  law  will  require  upon  a  check  or  sight 
draft.     *     *     *     But     *     *     *     we  think  that  a  note  payable  on  de- 
mand with  interest  is  a  continuing  security,  from  which  none  of  the 
parties  are  discharged  until  it  is  dishonored  by  an  actual  presentment 
and  refusal  to  pay.     *     *     *     jf  the  parties  declare  in  the  written 
instrument,  which  is  the  only  evidence  of  their  agreement,  that  the 
money  shall  be  paid  on  call,  with  interest  in  the  meantime  a  productive 
investment  of  the  sum  for  some  period  of  time  is  plainly  intended. 
What,  then,  is  that  period?    The  only  answer  which  can  be  given  is 
that  it  is  indefinite  or  indeterminative,  and  ascertainable  only  by  an 
actual  call  for  the  money;  and  if  that  be  the  meaning  of  the  principal 
parties  the  indorser  must  be  deemed  to  lend  his  name  to  the  contract 
with  the  same  intention.     *     *     *     We  see  no  good  reason  why  a 
note,  like  the  one  now  in  question,  should  not  be  construed  precisely 
according  to  its  terms,  and  if  we  follow  that  construction  such  instru- 
ments are  not  dishonored  by  the  mere  effluxion  of  time." 

Although  the  decision  in  Merritt  v.  Todd  was  subsequently  dis- 
cussed, and  in  some  cases  criticized,  its  authority  was  not  shaken  as  es- 


PRESENTMENT  241 

tablishing  a  rule  of  law  and  it  was  expressly  followed  as  late  as  in 
Parker  v.  Stroud,  98  N.  Y.  379,  50  Am.  Rep.  685.  See  Herrick  v. 
Woolverton,  41  N.  Y.  581,  1  Am.  Rep.  461 ;  Pardee  v.  Fish,  60  N.  Y, 
265,  19  Am.  Rep.  176;  Crim  v.  Starkweather,  88  N.  Y.  339,  42  Am. 
Rep.  250.  Judge  Comstock  followed  the  doctrine  of  the  English 
courts,  in  differentiating  notes  payable  on  demand  with  interest,  from 
those  payable  on  demand  merely.  He  sought  to  give  effect,  in  the 
former  case,  to  what  seemed  to  be  an  intention  of  the  parties  that,  not- 
withstanding the  terms,  there  should  be  no  immediate  demand,  and  that 
the  time  of  payment  should  be  future;  thus  making  the  instrument  a 
continuing  obligation. 

The  law  being  thus  settled  in  this  state,  the  negotiable  instruments 
law  was  passed,  in  1897,  as  the  outcome  of  a  general  movement  to 
bring  about  a  uniform  law  in  this  country  covering  the  subject  of  bills 
and  notes.  It  was  a  codification  of  the  law  and  in  the  respect  which 
we  are  considering  it  modified  the  rule  as  formulated  in  Merritt  v. 
Todd.  It  established  one  rule,  which  was  to  be  applicable  to  all  cases, 
that  where  "an  instrument  "is  payable  on  demand  presentment  must  be 
made  within  a  reasonable  lime  after  is-uc."  No  distinction  was  to  be 
made,  as  theretofore,  when  the  instrument  was  an  interest-bearing  obli- 
gation. While  therefore  it  must  be  regarded  as  changing  the  rule 
upon  the  subject  of  the  time  for  the  presentment  of  such  instruments, 
by  placing  them  upon  the  same  footing,  the  fourth  section  of  the  law 
has  to  be  given  effect;  which  requires,  in  determining  what  is  a  rea- 
sonable time,  a  consideration  to  be  had  of  the  nature  of  the  instru- 
ment, any  usage  of  trade  and  the  facts  of  the  particular  case.  That 
would  certainly  be  sufficient  to  authorize  the  differentiation  of  bills,  or 
promissory  notes,  from  other  instruments  for  the  payment  of  money ; 
but  even  where  it  is  a  question  of  the  time  within  which  a  demand  note 
must  have  been  presented,  the  facts  and  circumstances  of  the  case 
must  be  regarded.  If  a  note  is  payable  on  demand,  it  is  always  mature 
and  may  at  any  time  be  demanded.  The  statute  of  limitations  com- 
mences to  run  against  the  maker  from  its  issue.  Herrick  v.  Woolver- 
ton, 41  N.  Y.  587,  1  Am.  Rep.  461.  After  its  issue,  what  constitutes 
reasonableness  of  time  for  its  presentment  cannot  be  determined  by 
any  fixed  rules ;  for,  plainly,  the  particular  circumstances  may  be  such 
as  to  evidence  some  intention  of  the  parties  as  to  its  continuance.  And 
certainly  they  may  be  sufficient  to  justify  an  inference  of  unreason- 
able delay. 

In  my  opinion,  what  the  Legislature  intended  to  accomplish  by  the 
provisions  of  the  negotiable  instruments  law  in  question  was  to  do 
away  with  the  distinction  between  notes,  or  bills,  payable  on  demand, 
which  IMcrritt  v.  Todd  had  created,  and  to  leave  the  question  of  their 
reasonable  presentment  for  payment,  in  order  to  charge  the  parties  to 
them,  as  one  for  the  determination  of  the  court  upon  the  facts.  That 
Moore  Cases  B.&  N.— 16 


1242  PRESENTMENT  AND  NOTICE   OF    DISHONOR 

question,  if  the  facts  were  unsettled  and  the  testimony  was  conflicting, 
might  be  a  mixed  one  of  law  and  fact,  which  the  jury  should  decide, 
under  the  instructions  of  the  court  as  to  the  law ;  but  where  they  are 
ascertained,  and  are  not  in  dispute,  the  question  is  one  of  law.  Aymar 
V.  Beers,  7  Cow.  705,  709,  17  Am.  Dec.  538 ;  ^lohawk  Bank  v.  Brod- 
erick,  10  Wend.  304,  308;  Carroll  v.  Upton,  3  N.  Y.  272;  Hunt  v. 
Alaybee,  7  N.  Y.  266,  272. 

In  the  present  case  the  defendant  offered  no  evidence^  and  there  was 
no  dispute  about  the  facts.  The  trial  judge  had  before  him  the  facts 
of  the  discount  of  a  demand  note,  bearing  interest ;  that  the  indorse- 
ment by  Zimmerman  was  without  consideration  and  for  the  maker's 
accommodation;  that  its  payment  was  secured  by  the  deposit  of  cer- 
tain securities;  that  notwithstanding  that  some  two  years  after  the 
making  of  the  note  the  plaintiff  had  complained  to  Zimmerman  of  its 
nonpayment  and  twice,  a  year  later,  had  written  that  the  maker  was 
in  default  as  to  the  interest,  no  steps  were  taken  to  charge  the  indorser, 
by  presentment  of  the  note  for  payment  and  by  protest  for  nonpay- 
ment, until  more  than  three  and  a  half  years  had  elapsed.  If  the  finding 
that  the  note  was  not  presented  within  a  reasonable  time  depended  for 
its  justification  upon  the  evidence,  we  should  be,  undoubtedly,  con- 
cluded from  reviewing  it  by  the  rule  of  unanimous  affirmance.  But 
viewing  it,  as  I  think  we  must,  as  a  question  of  law  to  be  decided  by 
the  court  upon  the  ascertained  facts,  it  depended  upon  the  interpre- 
tation of  the  statute  as  applied  to  the  facts  and,  in  my  opinion,  the  de- 
cision of  the  trial  court  was  correct. 

It  is  argued  by  the  appellant  that  the  defense  that  tlie  note  was  not 
presented  within  a  reasonable  time. after  its  issue  was  one  which  should 
have' been  specially  preaded  in  the  answer.  This  objection  was  not 
taken  upon  the  trial ;  but,  assuming  that  it  could  properly  be  raised 
upon  the  appeal,  it  is  untenable.  The  burden  is  on  the  holder  of  a  note, 
when  seeking  to  charge_an  indQi.s£l-,  to  prove  due  and  timely  present- 
ment, and  the  giving  of  notice  to  the  indorser  of  its  dishonor.  The 
obligation  of  the  indorser  is  conditional  upon  all  the  steps  having  been 
taken  by  the  holder,  which  the  statute  has  prescribed  as  to  presentment, 
and  as  to  notice  of  nonpayment,  etc.  The  negotiable  instruments  law 
is  the  codification  of  the  law  merchant  upon  the  subjects  treated,  and 
in  setting  forth  what  is  required  of  the  holder  of  a  note  it  casts  upon 
him  the  burden  to  prove  that  the  requirements  were  all  complied  with. 
They  were  necessary  conditions  of  his  right  to  recover.  Present; 
ment  of  a  demand  note  within  a  reasonable  time  [s  a  requirement  of 
the  statute7  and  the  liability  of  the  indorser  to  make  good  the  con- 
tract of  the  maker,  unlike  that  of  a  guarantor,  is  conditional  and  de- 
pends upon  the  holder's  having  made  a  case  under  the  statute  of  an 
obligation,  which  he  has  caused  to  mature  and,  by  appropriate  legal 
steps,  to  become  an  indebtedness  of  the  contracting  parties.  Brown  v. 
Curtis,  2  N.  Y.  225.  Therefore  I  think  it  would  be"  incorrect  to  hold 
of  this  defense  that  it  is  of  an  affirmative  nature  and,  like  the  defense 


PKi:SENTMENT 


243 


of  usury,  or  any  other  defense  which  avoids  an  obligation,  that  it  must 
be  pleaded  to  be  available. 

No  other  question  demands  consideration  and,  for  the  reasons  given, 
I  advise  the  affirmance  of  the  judgment,  with  costs.     ♦     ♦     * 

Judgment  affirmed. 


DANA  V.  SAWYER. 
(Supreme  .Tudioial  Court  of  Maine,  1S43.     22  Me.  244,  39  Am.  Dec.  574.) 

The  action  is  on  a  promissory  note  signed  by  T.  Sawyer  &  Co.,  dated 
December  24,  1838,  for  $202.50,  on  four  months,  payable  to  and  in- 
dorsed by  the  defendant.  The  case  was  submitted  on  an  agreed  state- 
ment of  facts.  The  court  were  to  enter  a  nonsuit  or  default,  as  they 
might  determine  the  law  in  the  matter.^ 

SnKPLF,Y,  J.  This  case  is  presented  upon  an  agreed  statement  of 
tactSj  from  which  it  appears  that  a  demand  for  p.iNnient  was  made 
U]5on  the  maker  of  lhe_note,  between  11  and  12  o^-lock  at  night  on  the 
day~that  it  became" pajiable,  by  calling  him  from  his  bed,  an  1  that  he 
did  not  pay  it.  There  is  no  further  statement  of  anything  else  said 
or^'done.  except  that  a  notice  and  demand  for  payment  was  left  with 
him.  When  a  bill  or  note  is  payable  at  a  bank,  banking  house,  or  other 
place,  where  it  is  well  knp\Yji  that  business  is  transacted  only  during^ 
certain  hours  of  the  day,  the  law  presumes  that  the  parties  intended,  to _ 
conform losucK^tablished  course  of  business,  and  requires  that  a  de-«. 
mand  should  be  made  during  those  business  hours.  Parker  v.  Gordon, 
7  East,  385.  The  cases  of  Garnett  v.  Woodcock,  1  Starkie,  475,  and 
of  Henry  v.  Lee,  2  Chitty,  124,  may  show  an  exception  to  this  rule, 
that,  when  a  person  is  found  at  such  place  after  business  hours  author- 
ized to  give  an  answer,  the  demand  will  be  good.  While  it  may  be  dif- 
ficult to  reconcile  these  cases  with  the  case  of  Elford  v.  Teed,  1  M.  & 
S.  28,  when  the  bill  or  note  is  not  payable  at  a  place  where  there  are 
established  business  hours,  a  presentment  for  payment  may  be  made  at 
any  reasonable  hour  of  the  day.  Leftley  v.  Mills,  4  T.  R.  174;  Bar- 
clay V.  Bailey,  2  Campb.  527 ;  Triggs  v.  Newnham,  10  Moore,  249 ;  Wil- 
kins  v.  Jadis,  2  B.  &  Ad.  188.  What  hour  may  be  a  reasonable  one 
has  come  under  consideration  in  those  cases.  In  the  first  of  them 
Mr.  Justice  Duller  observes  that  "to  say  that  the  demand  should  be 
postponed  till  midnight  would  be  to  establish  a  rule  attended  with  mis- 
chievous consequences."  In  the  second  Lord  Ellenborough  said:  "If 
the  presentment  had  been  during  the  hours  of  rest,  it  would  have  been 
altogether  unavailing."  In  the  third  this  remark,  among  others,  is 
quoted  and  approved  by  Chief  Justice  Best.  In  the  fourth.  Lord  Ten- 
terden  remarked  that  "a.  presentment  at  12  o'clock  at  night,  when  a 
person  has  retired  to  rest,  would  be  unreasonable."     These  observa- 


2  The  statement  of  the  case  is  abridged. 


24:i  PRESENTMENT  AND  NOTICE  OF  DISHONOR 

tions,  so  just  and  so  applicable  to  this  case,  authorize  the  conclusion 
that  the  demand  was, not  made. at  a  reasonable  hour,  unless  the  fact 
that  the  nnkcr  \vas..S££ll-and  actuoll^LXaiied^upon  at  that  time  should 
make  a  diltereiice.  Perhaps,  in  analogy  to  the  exception  already  no- 
ticed, it  might  be  proper  to  admit  of  one  in  this  and  the  like  cases,  if 
it  should  appear  from  the  answer  made  to  the  demand  that  there  was 
a  waiver  of  any  objection  as  to  the  time,  or  that  payment  would  not 
have  been  made  upon  a  demand  at  a  reasonable  hour.  But  there  is 
nothing  in  this  agreed  statement  to  show  that  payment  might  not  have 
been  refused  because  the  demand  was  made  at  such  an  hour  that  the 
maker  did  not  choose  to  be  disturbed,  or  because  he  could  not  then 
have  access  to  funds  prepared  and  deposited  elsewhere  for  safety. 
Plaintifif  nonsuit. 


II.  Notice  of  Dishonor* 


PINKHAM  V.  MACY. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk  and  Nantucket,  1845.    9 

Mete.  174.) 

Assumpsit  on  the  following  note,  held  by  the  plaintiff,  as  executrix 
of  the  last,  will  of  Seth  Pinkham,  to  whom  it  was  indorsed  by  the 
payee: 

*'Nantucket,  April  1,  1837. 

"At  the  termination  of  the  ship  Obed  Mitchell's  present  voyage,  for 
value  received,  I  promise  to  pay  to  the  order  of  Josiah  Macy  eight 
hundred  and  fourteen  dollars  and  forty  one  cents,  with  interest  till 

paid. 

"James  Mitchell." 

At  the  trial  m  the  court  of  common  pleas,  at  Nantucket,  before 
Ward,  J.,  the  signatures  of  the  maker  and  indorser  were  admitted; 
and  the  plaintiff,  to  prove  demand  on  the  maker,  and  notice  to  the  de- 
fendant as  indorser,  called  J.  M.  Bunker,  a  notary  public,  who  testi- 
fied that  the  defendant  had  always  resided  in  Nantucket;  that  Mitchell, 
the  maker,  resided  there  at  the  date  of  the  note,  but  that  he  removed 
his  business  and  family  to  the  city  of  New  York  before  the  arrival 
of  the  ship  Obed  Mitchell;  that  said  ship  arrived  at  the  bar  of  Nan- 
tucket, on  Sunday  June  27,  1841 ;  that  the  witness,  on  the  next  day, 
took  said  note,  as  notary  public,  and  went  to  the  place  of  business  for- 
merly occupied  by  the  maker,  in  Nantucket,  and  found  it  closed ;  that 
he  then  went  to  the  house  formerly  occupied  by  the  maker,  in  Nantuck- 

8  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
146,  147. 


NOTICE    OF   DISIIONOE  215 

et,  and  found  another  family  residing  there,  but  then  presented  the  note 
and  demanded  payment  thereof,  which  was  refused;  and  that  he  there- 
upon made  and  gave  to  the  defendant  this  notice: 

"Nantucket,  June  28,  1841. 

"Please  to  take  notice  that  a  promissory  note  for  $814.41,  with  in- 
terest, dated  October  1,  1837,  payable  at  the  termination  of  ship  Obed 
Mitchell's  voyage,  now  completed,  signed  by  James  Mitchell,  and  in- 
dorsed by  you,  remains  this  day  unpaid,  and  that  the  holders  look  to 
you  for  payment  thereof.    Done  at  the  request  of  Seth  Pinkham. 

"James  M.  Bunker,  Notary  Public.     [Seal.] 

"To  Josiah  Macy." 

The  judge  ruled  that  said  notice  was  not  sufficient  to  charge  the  in- 
dorser;  and  the  jury  found  a  verdict  for  the  defendant.  The  plain- 
tiff alleged  exceptions  to  said  ruling. 

SiiAW,  C.  J.  The  question  is  whether  due  notice  was  given  to  charge 
the  indorser.  This  subject  was  so  fully  discussed  in  the  recent  case  of 
GHbert  v.  I/ennis,  3  Mete.  495,  38  Am.  Dec.  329,  that  it  seems  only 
necessary  to  inquire  whether  this  case  falls  within  the  principles  laid 
down  in  that  case.  The  rule  there  laid  down  was  that  the  notice  must 
be  such  &5  Jo  inform  the Jiidorser,  either  in  terms  or  by  reasonable 
implication,.jhat_the  note  was.  dishonojed;  that  is,  that  it  had  been 
presented_for_payment^_and  payment  refused,  or  other  act  done,  which 
by  law  is  deemed  equivalent.  It  ls~rlot'  necessary  to  state  what  has 
been  done;  whethcr-an  actual  demand  was  made,  or  that  the  note  lies 
over  at  a  bank  where,  by  contract  or  by  usage,  it  was  payable,  or  that 
the  maker  has  absconded.  All  this  is  matter  of  proof  afterwards,  to 
show  the  fact  of  dishonor.  But  the  notice  must  be  such  as  to  assert  or 
imply  that  the  note  has  been  presented -and  pa}'Tnent  refused,  or  other- 
wise dishonored.  It  was  also  stated  that  a  notice  simply  that  the  note 
is  unpaid  is  sufficient,  where,  from  the  terms  of  the  note,  nonpayment 
and  lapse  of  time  constitute  such  dishonor.  So,  when  a  note  is  payable 
at  a  bank,  it  is  the  duty  of  the  maker  to  pay  it  at  the  bank,  on  the  last 
day  of  grace.  Then  a  notice  dated  after  bank  hours,  on  that  day  or  the 
next  day,  simply  informing  the  indorser,  who  is  presumed  to  know  the 
terms  and  purport  of  the  note,  that  it  is,  at  that  time,  unpaid,  is  notice 
of  dishonor.  But  in  case  of  a  note  not  payable  at  a  place  certain,  where 
presentment  or  inquiry  is  necessary,  in  order  to  make  a  demand,  such 
a  notice,  either  on  or  after  the  day  of  payment,  is  not,  in  terms,  or  by 
intendment  or  implication,  notice  that  it  has  been  demanded,  or  that 
it  is  dishonored. 

In  the  present  case,  all  that  was  stated  in  the  notice  might  be  strictly 
true,  though  no  presentment  and  demand  had  been  made,  and  though 
the  maker  had  not.  left  the_. island,  and  no  inquiry  for  him  had  been 
made.  It  is,  therefore,  exactly  within  the  case  of  Gilbert  v.  Dennis. 
It  was  suggested,  in  the  argument,  that  there  is  a  difference,  because, 
in  the  present  case,  the  notice  was  given  by  a  notary  public.     But  this 


24G  PRESENTMENT  AND  NOTICE   OF    DISHONOR 

can  make  no  difference  in  principle ;  and  we  think  it  would  not  be  ex- 
pedient for  the  community  that  a  rule  of  law  so  universally  important 
should  depend  on  new  or  slight  distinctions.  A  notary  public,  in  such 
case,  is  the  mere  agent  of  the  holder.  His  service  is  not  required,  as 
in  case  of  a  foreign  bill  of  exchange,  to  make  a  protest.  City  Bank  v. 
Cutter,  3  Pick.  414. 

A  case  may  happen,  where  a  reference  to  a  protest  by  a  notary  pubr 
lie,  which  term  implies  a,  demand.and  refusal,  may  be  important,  be- 
cause it  intimates,  by  implication,  that  the. note  has-been  dishonored: 
As  where  the  notice  of  nonpayment  is  accompanied  with  notice  that 
the  holder  looks  to  the  indorser  for  payment,  with  costs,  or  fees,  or 
charges  of  protest.  This  may  be  sufficient  to  show,  by  reasonable  in- 
tendment, that  it  has  been  protested  for  nonpayment,  which  is  notice 
of  dishonor.  But  the  present  notice  carries  no  such  implication,  but 
is  a  simple  notice  of  nonpayment,  without  intimation  of  dishonor. 

There  seems  to  be  another  good  ground  of  defense,  namely,  that  the 
demand  and  notice  were  too  soon.  If  the  arrival  of  the  ship  at  Nan- 
tucT^etlvasTTot  the  tefhiinatldn  of  the  voyage,  then  they  were  too  soon. 
If  it  was  such  termination,  then  it  became  a  day  certain,  and  the  note 
was  entitled  to  grace. 

Exceptions  overruled. 


LINN  V.  HORTON. 

(Supreme  Court  of  Wisconsin,  1863.     17  Wis.  1.51.) 

Yates  and  Gray,  for  value,  gave  their  note,  indorsed  for  them  by 
Horton  before  delivery,  and  payable  to  the  plaintiffs  or  order  at  the 
Rock  County  Bank,  at  Janesville,  in  this  state.  Before  the  note  be- 
came due,  the  plaintiffs,  who  were  merchants  in  the  city  of  New  York, 
indorsed  it  for  collection  to  Kissam  &  Taylor^  bankers  in  the  same  city, 
who  indorsed  it  and  sent  it  for  collection  to  the  Central  Bank  of  Wis- 
consin, at  Janesville.  Default  having  been  made  in  its  payment  when 
due,  to  wit,  November  22,  1861,  it  was  duly  protested,  and  on  the  same 
day  the  note  and  notice  of  protest  for  Horton,  and  like  notices  for 
Kissam  &  Taylor  and  the  plaintiffs  respectively,  were  inclosed  in  an 
envelope  and  deposited  in  the  post  office  at  Janesville,  post  paid,  di- 
rected to  Kissam  &  Taylor,  who  received  the  same  November  27th. 
On  the  same  day  Kissam  &  Taylor  delivered  to  the  plaintiffs  the  notices 
addressed  to  them  and  to  Horton  respectively;  and  the  plaintiffs,  on 
the  same  day,  inclosed  the  notice  for  Horton  in  an  envelope  directed  to 
him  at  Janesville,  and  deposited  the  same  post  paid,  in  the  post  office 
at  New  York ;  but  the  notice  was  never,  in  fact,  received  by  Horton. 
This  action  was  brought  against  Horton  together  with  the  makers ;  but 
the  circuit  court  found  that  "the  notary,  who  protested  the  note,  did 
not  use  due  diligence  to  ascertain  the  residence  of  Horton,"  and  there- 


NOTICE   OF   DISHONOR  -  ^  ' 


upon  held  that  proper  steps  had  not  been  taken  to  charge  him,  and  ren- 
dered judgment  in  his  favor;  from  which  the  plaintiffs  appealed.* 

Dixon,  C.  J.  It  is  an  established  principle  of  nieicantile  law  that, 
ifjhe  holder  of  a  bill  o^'noTe  choosc-Tio  rely  upon  the  responsibility  of 
his  immediate  hidorMr,  there  Ts  no  necessity  for  his  giving  notice  to 
any  previous  party ;  and  in"''h  notice  be  properly,  given,  in  due  time, 
bv^Lll£_other  parties,  it  will  inure  to  the  benctit  of  the  holder,  and  he 
may  recover  thereon  against  any  of  them.  Thus,  if  the  holder  notifies 
the  sixth  indorser,  and  he"  the  fifth,  and  so  on  to  the  first,  the  latter 
will  be  liable  to  all  the  parties.  1  Parsons  on  Bills  and  Notes,  503, 
504;  and  Edwards  on  Bills  and  Notes,  473,  474,  and  the  cases  cited. 
And  it  is  no  objection  to  such  notice  that  it  is  not  in  fact  received  so 
soon  by  the  first  or  any  prior  indorser,  as  if  it  had  been  transmitted 
directly  by  the  holder  or  notary,  provided  it  has  been  seasonably  sent 
by  each  indorser  as  he  receives  it.  Colt  v.  Noble,  5  Mass.  167 ;  Mead 
V.  Engs,  5  Cow.  (N.  Y.)  303 ;  Howard  v.  Ives,  1  Hill  (N.  Y.)  263.  And 
the  same  degree  of  diligence  must  be  exercised  on  the  part  of  the 
indorser  in  forwarding  notice  as  is  required  of  the  holder.  Ordinary 
diligence  must  be  used  in  both  cases.  He  is  not  bound  to  forward  no- 
tice on  the  very  day  upon  which  he  receives  it,  but  may  wait  until  the 
next.     Howard  v.  Ives,  and  the  authorities  cited. 

For  the  purpose  of  receiving  and  transmitting  notices,  those  who 
hold  at  the  time  of  protest,  and  those  who  indorse  as  mere  agents  to 
collect,  are  regarded  as  real  parties  to  the  bill  or  note ;  the  former  as 
holders  in  fact,  and  the  latter  as  actual  indorsers  for  value.  Mead  v. 
Engs ;  Howard  v.  Ives. 

It  follows,  from  these  principles,  that  the  proper  steps  were  taken  to 
charge  the  defendant  Horton  as  indorser.  Notice  for  him  was  for- 
warded by  mail,  post  paid,  on  the  day  of  the  protest,  to  the  agents  and 
last  indorsers  in  New  York,  and  delivered  by  them,  on  the  day  it  was 
received,  to  the  plaintiffs,  their  immediate  indorsers,  w^ho,  on  the  same 
day,  deposited  it,  inclosed  in  an  envelope,  post  paid,  in  the  post  office 
at  New  York,  directed  to  the  defendant  at  Janesville,  Wis.,  his  proper 
post  office. 

Under  these  circumstances  the  only  question  w^hich  caji_20S5ihl^_arise 
is  whether  the  defendant  ought  to  be  discharged  by  reason  of  the  notice 
not  having  been  in  fact  received  by  him.  Hejestifies  that  it  was  not. 
Professor  Parsons'observes  tha"t  in  all  the  cases  of  constructive  notices, 
where  notice  given  by  a  subsequent  to  a  prior  indorser  has  been  held 
to  inure  to  the  benefit  oflhe  immediate  indorser,  it  has  appeared  that 
the  notice  was  actually  received;  and  he  raises  a  question  whether  this 
would  be  so  if  the  notice  was  sent  to  the  wrong  place.  1  Pars,  on 
Notes  and  Bills,  504,  note,  and  627."  But  Iicro  tlie  notice  was  sent  to 
the  right  place.  Besides,  the  plaintiff's,  who  st-ek  to  avail  themselves" 
of  the  notice,  are  the  indorsers  who  sent  it  to  the  defendant  as  the  in- 

4  The  arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


248  PRESENTMENT  AND  NOTICE  OF    DISHONOR 

dorser  next  immediately  preceding  them.    We  have  already  seen  that 
the  rule  of  diligence  as  to  them  is  the  same  as  in  the  case  of  the 
holder.     *     *     * 
Judgment  reversed. 


AIMERICAN  EXCH.  NAT.  BANK  v.  AMERICAN  HOTEL  VIC- 
TORIA CO.  et  al. 

(Supreme  Court  of  New  York,  Appellate  Division,  1905.    103  App.  Div.  372, 

92  N.  Y.  Supp.  lOOG.) 

Laughlin,  J.  The  action  is  against  Charles  M.  Reed,  the  maker, 
and  the  appellant,  as  the  indorser,  of  a  promissory  note  payable  to  the 
order  of  Costikan  Freres.  The  complaint  alleges  that  the  appellant^ 
duly  indorsed  the  note  prior  to  maturity,  having  received  full  value 
therefor,  and  delivered  the  same  to  the  payee  for  full  value;  that  the 
payee  subsequently  and  before  maturity,  for  full  value,  duly  indorsed 
and  delivered  the  note  to  the  plaintiff ;  that  the  note  was  duly  present- 
ed for  payment  at  the  First  National  Bank  of  Erie,  Pa.,  where  it  was 
made  payable,  and  payment  thereof  duly  demanded  and  refused,  where- 
upon it  was  duly  protested  for  nonpayment,  and  that  notice  thereof 
was  forthwith  duly  given  to  all  of  the  indorsers.  The  answer  of  the 
appellant  put  in  issue,  among  other  things,  the  allegations  of  the  com- 
plaint concerning  notice  to  it  of  the  presentation  of  the  note  for  pay- 
ment, the  demand  and  refusal  of  payment,  and  of  the  protest.  The 
plaintiff  proved  the  making  and  indorsement  of  the  note,  the  delivery 
to  it,  and  offered  the  note  in  evidence  with  the  notary's  certificate  show- 
ing that  he  protested  it  for  nonpayment  on  the  14th  day  of  October, 
1901,  the  day  it  fell  due. 

For  the  purpose  of  proving  the  service  of  the  notice  of  protest  on 
the  appellant,  the  plaintiff  called  one  Mairs,  who  testified  that  on  the 
16th  day  of  October,  1901,  he  served  an  original  notice  of  protest  made 
by  the  notary  at  Erie,  Pa.,  on  the  14th,  and  addressed :  "To  American 
Hotel  Victoria  Co.  S.  B.  A.  Price,  Prest." — upon  the  appellant  at  the 
Victoria  Hotel,  Broadway  and  Twenty-Seventh  street,  by  leaving  it 
"at  the  cashier's  window."  He  does  not  show  that  the  cashier  or  any 
one  else  was  present  or  that  he  drew  the  attention  of  any  one  thereto, 
or  that  he  made  any  effort  to  find  any  officer  of  the  defendant,  or  any 
one  in  charge  of  the  hotel,  to  whom  to  deliver  it.  The  defendant  called 
Mr.  Sweeney,  who  testified  that  he  was  elected  president  of  the  de- 
fendant and  purchased  its  capital  stock  on  the  2d  of  January,  1901. 
and  continued  to  be  president  down  to  the  time  of  the  trial;  that  he 
had  charge  of  the  management  of  the  business  of  the  appellant  and  of 
the  hotel  during  the  same  period,  and  on  the  16th  day  of  October,  1901 ; 
that  he  did  not  see  or  receive  any  notice  of  the  protest  or  dishonor  of 
the  note,  and  the  first  he  knew  of  the  existence  of  the  note,  or  heard  of 
it,  was  when  he  received  a  letter  from  attorneys  stating  that  they  had 


NOTICE   OF  DISHONOR  249 

the  note  for  collection;  and  that,  unless  it  was  paid  within  a  certain 
time,  action  would  be  brought  thereon.  At  the  close  of  the  evidence, 
counsel  for  the  appellant  moved  to  dismiss  the  complaint  upon  the 
ground,  among  others,  that  the  plaintiff  had  failed  to  prove  notice  to 
it  of  the  dishonor  of  the  note.  The  motion  was  denied,  and  an  ex- 
ception taken. 

We  are  of  opinion  that  the  judgment  must  be  reversed.  The  ap- 
pellant is  sued  solely. -^s  indorser  of  this  note.  The  evidence  is  wholly 
insufficient  to  show  the  service  of  the  notice  of  protest  upon  it.  Mego- 
tia^  Tnstrunlenfs'raw  (Laws  \^,  p.  7^5^c.  612)  §§  160,  167,  168, 
provide  that  notice  of  dishonor,  to  charge  an  indorser,  may  be  given 
by  delivering  it  personally  Or  through  the  mail  cither  to  the  party  him- 
self, or  "to  his  "agent  in  that.b£balf."  This  doubtless  was  not  intended 
to  change  the  rule  as  it  theretofore  existed.  Eaton  &  Gilbert  on  Com. 
Paper,  489.  Where  personal  service  is  relied  upon,  the  evidence  must 
show  either  actual  personal  service,  or  an  ordinarily  intelligent,  dili- 
gent effort  to  make  personal  service,  upon  the  indorser,  either  at  his 
place  of  business  during  business  hours,  or  at  his  residence  if  he  have 
no  place  of  business ;  but,  if  he  be  absent,  it  is  not  necessary  to  call  a 
second  time,  and  the  notice  may  in  that  event  be  left  with  any  one 
found  in  charge,  or,  if  there  be  no  one  in  charge,  or  no  one  there,  then 
the  giving  of  notice  is  deemed  to  be  waived.  Stewart  v.  Eden,  2 
Caines,  121,  2  Am.  Dec.  222;  Bank  of  Commonwealth  v.  Mudgett,  45 
Barb.  663;  Id.,  44  N.  Y.  514;  New  York  &  Alabama  Contracting  Co. 
V.  Selma  Savings  Bank,  51  Ala.  305,  306,  23  Am.  Rep.  552;  Allen  v. 
Edmondson,  2  Exch.  Rep.  719;  Williams  v.  Bank  of  U.  S.,  2  Pet.  96, 
7  L.  Ed.  360 ;  Huffcut's  Negotiable  Instruments,  p.  47.  The  evidenc,^ 
in  this  case  shows  that  personal  service  was  not  made  upon  any  officer 
ofThe  corporation,'  and  there  is  no  evidence  that  the  notice  was  left 
with  any  agent  of  the  corporation,  or  even  where  it  might  be  reason- 
ably  inferred  lhat_aif  officer  or  agent  of  the  corporation  would  receive 
it.  It  does  not  even  appear  upon 'what  floor  or  in  what  part  of  the 
hotel  the  cashier's'  wihd"ow  was,  at  which  the  notice  was  left.  There 
can  be  no  inference  from  such  evidence  that  the  notice  was  received 
byjJie  corporation ;  and  the  president  and  manager  of  the  hotel,  who 
was  in  charge,  testifies  that  it  was  not  brought  to  his  attention. 

Judgment  reversed. 


250  PRESENTMENT  AND  NOTICE   OF   DISHONOR 


III.  When    Presentment    or    Notice    of    Dishonor    Excused,    and 
When  Due  Diligence  Dispensed  with  ^ 


REED  V.  SPEAR. 

(Supreme  Court,   Appellate  Division,   Fourth   Department,   New   York,   1905. 
107  App.  Div.  144,  94  N.  Y.  Supp.  1007.) 

HiscocK,  J.®  This  case  was  brought  on  for  trial  before  the  county 
judge  and  a  jury.  At  the  close  of  the  evidence  each  side  moved  for  a 
direction  of  a  verdict,  and  therefore  any  questions  of  fact  or  divergent 
inferences  from  the  evidence  are  to  be  regarded  as  having  been  settled 
in  favor  of  the  plaintiff. 

The  action  was_brought  against  the  defendant  as  indorser^ola  prom- 
isspry  note  made  by  one  Harry  A.  Lamkin,  dated  at  Sinclairville,  Chau- 
tauqua county,  N.  Y.",  August  9,  1900,  whereby  said  maker,  for  value 
received,  promised  "to  pay  Emma  Reed,  or  bearer,  four  hundred  dol- 
lars and  annual  interest  in  the  following  manner  to  wit:  $100  of 
the  principal  August  9,  1902;  $100  August  9,  1903;  $100  August  9, 
1904,  and  $100  August  9,  1905,  the  interest  to  be  paid  annually  on  the 
9th  day  of  August  of  each  year ;  the  undersigned  to  have  the  right  to 
pay  any  part  or  the  whole  of  said  principal  sum  before  the  same  shall 
become  due." 

Recovery  was  sought  with  interest  on  the  three  instahments  of  prin- 
cipal becoming  due  respectively  August  9,  1902,  August  9,  1903,  and 
August  9,  1904.  Upon  the  trial,  plaintiff  abandoned  his  claim  as  to  the 
first  installment,  but  recovered  upon  the  last  two.  It  is  insisted  by  the 
defendant  that  such  recovery  w^as  erroneous,  that  no  proper  or  neces- 
sary evidence  was  given  of  the  presentment  or  notice  of  dishonor  of 
said  note  as  to  said  installments,  and  that  the  evidence  given  by  plain- 
tiff' tending  to  excuse  him  from  presentment  and  notice  of  dishonor 
was  incompetent  and  improperly  received  under  his  complaint. 

We  conclude  that  plaintiff  has  failed  to  establish  the  necessary  notice 
of  dishonor  of  said  note  as  to  said  first  installment,  and  cannot  recover 
therefor,  but  that  he  established  a  right  to  recover  as  to  the  second  in- 
stallment embraced  in  the  judgment. 

Plaintiff  having  abandoned  his  claim  to  the  installment  becoming  due 
August  9,  1902,  we  need  not  discuss  that. 

Lamkin,  the  maker  of  the  note,  died  a  few  days  before  the  install- 
ment of  August  9,  1903,  became  due.  A  few  days  after  the  same  be- 
came due,  one  Chessman  was  appointed  administrator  of  his  estate. 
Emma  J.  Reed,  the  payee  and  owner  of  the  note,  died  March  7,  1904, 

5  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4th  Ed.)  §§ 
148,  148a. 

6  Parts  of  the  opinion  are  omitted. 


PRESENTMENT   OR    NOTICE    EXCUSED 


2ol 


and  subsequently  plaintiff  was  appointed  her  administrator.  No  place 
of  payment  being  specified  in  the  note,  and  the  person  primarily  liable 
tlicrcon  being  dead;  and  no  personal  representative  having  been  ap- 
pointed, the  holder  of  the  note  was  excused  from  presenting  the  same 
for  payment  of  the  installment  becoming  due  in  August,  1903,  under 
the  provisions  of  section  136  of  the  negotiable  instruments  law  (Laws 
1897,  p.  7Z7,  c.  612),  which  reads  as  follows:  "Where  the  person 
primarily  liable  on  the  instrument  is  dead,  and  no  place  of  payment  is 
specified,  presentment  for  payment  must  be  made  to  his  personal  rep- 
resentative, if  such  there  be,  and  if  with  the  exercise  of  reasonable  dili- 
gence he  can  be  found." 

But  as  we  construe  the  statute,  the  holder  of  the  note,  although  ex- 
cused under  the  circumstances  from  presentment  for  payment,  was  not 
excused  from  giving  notice  of  dishonor  to  the  indorser.  Section  160 
(page  739)  of  the  statute  referred  to  provides:  "Except  as  herein 
otherwise  provided,  when  a  negotiable  instrument  has  been  dishonored 
by  nonacceptance  or  nonpayment,  notice  of  dishonor  must  be  given 
*  *  *  to  each  endorser  and  any  *  *  *  endorser  to  whom  such 
notice  is  not  given  is  discharged." 

Section  143  (page  738)  provides  that:  "The  instrument  is  dishon- 
ored by  nonpayment  when :  (1)  *  *  *  (2)  Presentment  is  excused 
and  the  instrumejrt  is  overdue  and  unpaid." 

These  lections  seem  to  make  it  clear  that,  although  presentment  for 
nonpayment  may  be  excused  under  such  circumstances  as  existed  in 
this  case,  the  indorser  is  still  entitled  to  notice  of  dishonor  of  the  in- 
strument by  its  being  overdue  and  unpaid. 

No  proof  was  offered  of  notice  to  the  defendant  indorser  of  the  dis- 
honor of  the  note  as  to  this  installment,  except  as  the  plaintiff  seeks 
to  have  it  supplied  by  inferences  drawn  from  certain  conversations 
with  the  defendant,  but  which  we  feel  are  insufticient  for  that  pur- 
pose.    *     *     * 

We  pass  to  the  consideration  of  the  installment  becoming  due  in  Au- 
gust, 1904.  At  this  time  an  administrator  had  been  appointed  of  the 
maker  of  the  note  and  also  of  the  holder.  The  latter  lived  at  Sinclair- 
ville,  in  Chautauqua  county.  The  former  resided  at  Fredonia,  in  said 
county,  some  distance  from  the  former  place,  and  connected  therewith 
by  railroad.  At  the  time  this  installment  became  due  he  was,  how- 
ever a  member  of  a  banking  firm  which  had  its  place  of  business  in 
Sinclairville,  and  was  also  interested  in  other  business  industries  lo- 
cated in  the  same  place,  and  was  accustomed  to  spend  more  or  less  time 
in  looking  after  said  interests.  Upon  the  day  when  the  installment  be- 
came due,  plaintiff'  went  two  or  three  times  to  the  banking  office  for  the 
purpose  of  presenting  the  note  to  the  maker's  said  administrator,  but 
wa^unable  jtp.  fiiidJiim.  .  He  also  sought  him  at  the  railroad  station 
near  the  seat  of  his  other  business  interests,  and  at  a  time  when  he 
might  be  expected  to  take  or  alight  from  a  train,  but  did  not  find  him. 


Ok:0  presentment  AND   NOTICE  OF    DISHONOR 

Having  failed  to  find  him  at  about  9  o'clock  in  the  evening,  he  drew  a 
notice,  of  which  the  following  is  a  copy: 

"Sinclalrville,  August  9,  '04. 

"To  W.  N.  Spear:  Take  notice  that  the  last  $100  installment  of  a 
note  given  to  Emma  J.  Reed  August  9th,  1900,  by  Harry  Lamkin  and 
endorsed  by  you  fell  due  this  day  and  remains  unpaid  at  this  hour  of 
9  p.  m.  and  that  I  shall  look  to  you  for  payment. 

"C.  M.  Reed,  Admin.  E.  J.  Reed  Est." 

Upon  the  following  day  he  sought  to  serve  this  notice  upon  the  de- 
fendant at  his  store  in  Fredonia,  but  after  one  or  more  efforts,  having 
failed  to  find  him,  delivered  it,  sealed  and  addressed,  to  defendant's 
wife  in  the  store,  who  acted  as  his  clerk  and  assistant.  There  is  evi- 
dence that  the  notice  was  actually  received  by  the  defendant  upon  the 
date  of  service,  August  10,  1904. 

Upon  this  evidence  the  county  judge  was  entitled,  as  a  matter  of 
fact,  if  not  of  law,  to  find  a  sufficient  compliance  by  plaintiff  with  the 
provisions  of  the  negotiable  instruments  law  applicable  to  such  a  case. 
Under  section  136,  already  quoted,  the  obligation  existed  to  make  pre- 
sentment of  the  note  to  the  personal  representative  of  the  maker  if 
"with  the  exercise  of  reasonable  diligence  he  could  [can]  be  found." 
And,  conversely,  under  section  142  (page  738),  presentment  for  pay- 
ment was  dispensed  with  where  the  same  could  not  be  made  "after  the 
exercise  of  reasonable  diligence."  Section  167  (page  740)  provided 
that  the  notice  of  dishonor  "may  be  in  writing  or  merely  oral  and 
may  be  given  in  any  terms  which  sufficiently  identify  the  instrument, 
and  indicate  that  it  has  been  dishonored  by  nonacceptance  or  nonpay- 
ment." Sections  167  and  168  respectively  provide  that  such  notice  may 
be  given  by  delivering  it  personally  or  through  the  mails,  and  that  it 
may  be  given  either  to  a  party  himself  or  to  his  agent  in  that  behalf. 

The  evidence  fairly  warranted  a  finding  that  reasonable  diligence 
was  exercised  by  plaintiff  in  his  effort  to  present  for  payment  the  note 
to  Mr.  Chessman  as  administrator  of  the  maker  of  the  note.  No  ques- 
tion is  raised  but  that  the  notice  of  dishonor  was  served  in  due  time, 
and  we  think  no  question  can  be  successfully  made  but  that  said  notice, 
was  sufficient  in  f orm^  and  properly  served  upon  defendant's  wife  and 
ag^t,  especially  in  view  of  the  fact  that  it  actually  came  into  defend- 
ant's possession  within  the  time  allowed  by  law.     *     *     * 

Judgment  reversed,  in  so  far  as  it  allows  a  recovery  for  the  install- 
ment due  August  9,  1903 ;  otherwise,  affirmed. 


PEESENTMENT   OR  NOTICE    EXCUSED  253 

TORBERT  V.  MONTAGUE. 
(Supreme  Court  of  Colorado,  1906.    38  Colo.  325,  87  Pac.  1145.) 

Maxwell,  J.'  A  trial  to  the  court  below,  without  a  jury,  resulted 
in  a  judgment  against  appellant  as  indorser  upon  thjeg  promissory 
notes.  It  is  conceded  that  there  was  no  presentment  of  tjie  notes  for 
p^jment^^s  required  by 'section  70,  p.  22:),  and  no  notice  oTBishonor, 
as'^ required  by  section  89,  c.  64,  p.  228,  of  the  Acts  of  1897,  "Nego- 
tiable Instruments"  (3  Mills'  Ann.  St.  Rev.  Supp.  §§  245m,  247d). 
But  it  is  claimed  that  there  was  a  waiver  of  presentment  and  notice 
of  dishonor  under  sections  82  and  109  of  the  above  statute.     *     *     * 

Over  defendant's  objection  plaintiff's  husband,  who  was  acting  as 
her  agent  in  the  matter,  was  allowed  to  testify,  in  substance,  that  at 
the  time  the  notes  were  indorsed  and  delivered  to  witness  by,  Mr.  Fow- 
ler, of  the  firm  of  Torbert  &  Fowler,  of  which  firm  appellant  was  a 
member,  Mr.  Fowler  said,  quoting  from  the  abstract  of  the  record : 
"That  they  [meaning  Torbert  &  Fowler]  would  be  responsible  for 
the  interest  and  the  principal  when  it  becomes  due ;  that  I  would  have 
nothing  to  do  whatever  with  the  collection  of  the  note,  or  the  principal 
of  it;  that  they  would  look  after  the  collection  of  the  note  when  it 
became  due  and  pay  me  the  interest  when  it  became  due" ;  and  that  the 
same  statement  was  substantially  repeated  several  times  thereafter 
prior  to  the  maturity  of  the  notes.  A  motion  to  strike  out  all  of  this 
testimony  interposed  by  defendant's  counsel  was  overruled,  and  an  ex- 
ception saved. 

There  is  evidence  in  the  record  to  the  efifect  that  Torbert  &  Fowler 
WQre  conducting  a  chattel  loan  and  business  chance  business  in  the^ 
city  of  Denver;  that  the  notes  upon  which  this  suit  was  brought  were' 
inclorsed  by  Mr".  Fowler  in  the  name  of  Torbert  &  Fowler  at  the  time 
they  were  delivered  to  appellee's  agent;  that  the  firm  of  Torbert  & 
Fowler  managed  and  conducted  the  entire  business  for  appellee,  col- 
lecting and  paying  over  to  her  the  installments  of  interest  as  they  fell 
due  and  a  portion  of  the  principal  of  one  of  the  notes,  which  seems  to 
have  been  realized  from  the  foreclosure  of  a  chattel  mortgage  given 
to  secure  the  note  upon  which  a  partial  payment  was  m'ade.  In  short, 
the  evidence  tends  to  prove  that  Torbert  &  Fowler  were  acting  as  the 
agents  of  appellee  in  the  matter.  Appellant  did  not  introduce  any  evi- 
dence. 

The  judgment  of  the  court,  set  forth  in  full  in  the  abstract,  conclu- 
sively shows  that  it  was  based,  in  part  at  least,  upon  the  testimony  of 
the  witness  as  to  a  parol  agreement  made  contemporaneously  with  the 
indorsement  of  the  notes  to  appellee.  It  is  settled  in  this  state  that  the 
le^al  eft'ect  of  a  blank  indorsement,  which  was  the  indorsement  upon 
the  notes  sued  upon  in  this  action,  cannot  be  varied  by  parol.    Martin 

f  Part  of  the  opinion  Is  omitted. 


254  PRESENTMENT  AND  NOTICE   OF    DISHONOR 

V.  Cole,  3  Colo.  113;  Dunn  v.  Ghost,  5  Colo.  134;  Doom  v.  Sherwin, 
20  Colo.  234,  38  Pac.  56.  This  being  the  rule,  all  testimony  as  to  a 
parol  agreement  between  the  indorser  and  the  indorsee  contemporane- 
ous with  the  indorsement  of  the  note  sued  upon  was  incompetent,  and 
should  have  been  rejected. 

It  is  insisted  by  appellee  that  there  is  sufficient  evidence  in  the  rec- 
ord, exclusive  of  the  incompetent  testimony  above  referred  to,  to  sup- 
port the  finding  of  the  court  to  the  effect  that  there  was  a  waiver  of 
presentment  for  payment  and  notice  of  dishonor.  As  seen  above  by 
sections  82  and  109  of  the  negotiable  instrument  statute  presentment 
for  payment  and  notice  of  dishonor  may  be  waived,  and  the  waiver 
may  be  express  or  implied. 

Appellant  concedes  this  to  be  the  law,  but  insists  that  the  testimony 
relied  upon,  which  is  quoted  from  the  abstract,  supra,  does  not  prove 
a  waiver.  The  findings  of  the  court  were  as  follows  :  "I  am  compelled 
to  find,  from  the  evidence  in  the  case,  that  the  evidence  discloses  the^ 
fact  that  the  conduct  and  promises  and  manner  of  transacting  the  busi- 
ness by  the  firm,  on'the  part  of  Mr.^Fowler,  at  that  time  misled  and 
caused  the  plaintiff  to  rely  upon  those  promises  and  upon  that  course 
ofconduct,  to  the  extent. that  she  left  the  matter  entirely  to  the  firm  of 
Torbert  &  Fowler  to  attend  to  the  collection  and  take  charge  of  the 
matter,  and  that  the  evidence  discloses  they  got  their  pay  for  it  and 
got  their  commission  on  this  matter,  and  undertook  the  responsibility 
of  doing  it,  and  that  was  the  cause,  under  the  evidence  at  least,  for 
the  failure  on  the  part  of  the  plaintiff  to  present  these  notes  and  give 
any  further  notice  of  dishonor."     *     *     * 

The  question  to  be  determined  is  whether,  upon  a  fair  construction 
of  the  language  used„by  Fowler,Jiig  conduct  in  relation  to  the  matters 
in  controversy,  and  his  acts  as  agent  of  appellee,  were  calculated  to  mis- 
lead appellee,  "^to  put  her  off  her  guard,  and  to  induce  her  to  forbear 
taking  the  necessary  steps  to  charge  appellant  as  indorser.  In  Union 
Bank  v.  Magruder,  7  Pet.  287,  8  L.  Ed.  687,  the  United  States  Supreme 
Court,  according  to  the  headnote,  held:  "Whether  certain  declara- 
tions by  the  indorser  of  a  note  amounted  to  a  waiver  of  demand  on 
the  maker  and  notice  to  the  defendant,  or  to  a  new  promise  in  consid- 
eration of  forbearance,  are  questions  of  fact  for  the  jury,  under  in- 
structions from  the  court,  not  mere  questions  of  law."  Declarations 
intermixed  with  acts  and  conduct,  as  in  this  case,  seem  to  us  to  raise  a 
question  of  fact  to  be  determined  by  the  court  or  jury.  So  the  rule  is 
stated  by  Daniel,  §  1103,  and  Randolph,  §  1383,  quoted  above.  The 
court  below  found  this  fact  against  the  appellant,  and  we  do  not  feel 
at  liberty  to  disturb  it. 

In  view  of  all  the  circumstances  surrounding  this  case,  as  disclosed 
by  the  transcript  of  the  evidence,  which  has  been  read  with  great  care, 
the  judgment  will  be^affirmed.  , 


CHECKS  -^5 


CHECKS 
I.  Presentment  and  Notice  of  Dishonor— Effect  of  Delay  * 


MORRISON  V.  McCartney. 

(Supreme  Court  of  Missouri,  ISGO.    30  Mo.  183.) 

NapTon,  J.^  This  was  a  suit  by  Morrison  &  Lackland  upon  a 
check  payable  in  currency,  drawn  by  the  defendant  upon  E.  WTXTarF" 
&  Bros.,  blin'kers  TrTJSt.  Louii;  in  favor  of  Bohn  &  Co.,  and  indorsed 
to  plaintiffs.  The  check  was  dated  and  delivered  to  Bohn  8:  Co.  on 
the  2d  of  October,  1857,  and  transferred  by  indorsement  to  the  plain- 
tiffs on  the  same  day.  It  was  not  presented  to  the  drawees  until  the 
29th  of  January,  1858,  when  payment  was  refused,  and  it  was  duly 
protested  and  notice  given  to  the  defendant.  It  appears  that,  about 
3  o'clock  of  the  3d  of  October,  the  house  of  Clark  &  Bros,  was  closed 
or  stopped  payment;  but  on  the  6th  of  October,  1857,  the  defendant, 
who  had  previously  commenced  suits  by  attachment,  compromised 
these  suits,  settled  with  Clark  &  Bros.,  and  withdrew  his  deposits. 
The  question  in  the  case  was  whether  the  plaintiffs  were  entitled  to 
recover,  notwithstanding  their  failure  to  present  the  check  on  the  day 
after  it  was  indorsed  to  them,  upon  showing  that  the  drawer  sustained 
no  injury  by  the  delay,  and  that  before  suit  brought,  and  within  a 
reasonable  time,  demand,  protest,  and  notice  were  duly  given. 

The  law  on  this  subject  is  stated  in  Kent's  Commentaries  as  follows : 
"The  drawer  of  a  check  is  not  a  surety,  but  the  principal  debtor,  as 
much  as  the  maker  of  a  promissory  note.  The  check  is  the  acknowl- 
edgment of  a  certain  sum  due.  It  is  an  absolute  appropriation  of  so 
much  money  in  the  hands  of  his  banker  to  the  holder  of  the  check,  and 
there  it  ought  to  remain  till  called  for ;  and  unless  the  drawer  actually 
suffers  by  the  delay,  as  by  the  intermediate  failure  of  his  banker,  he 
has  no  reason  to  complain  of  delay  not  unreasonably  protracted.  If 
the  holder  does  so  unreasonably  delay,  he  assumes  the  risk  of  the 
drawee's  failure,  and  he  may,  under  circumstances,  be  deemed  to  have 
made  the  check  his  own  to  the  discharge  of  the  drawer.  But  this  is 
quite  distinct  from  the  strict  rule  of  diligence  applicable  to  a  surety, 
in  which  light  stands  the  indorser,  who  has  a  right  to  require  diligence 
on  the  part  of  the  holder  to  relieve  him  from  responsibility."  4  Kent, 
549. 

1  For  discussion  of  principles,  see  Norton  on  Dills  and  Notes  (4th  Ed.)  §  150. 

2  The  statement  of  the  case,  the  arguments  of  counsel,  and  part  of  the  opin- 
ion are  omitted. 


256  CHECKS 

This  view  of  the  law  is  adopted  by  Judge  Story  in  the  chapter,  in 
his  work  on  Promissory  Notes,  devoted  to  the  subject  of  checks. 

His  language  is  that  "the  drawer  [of  a  check]  will  at  all  times  be 
liable  to  pay  the  same  if  the  holder  can  show  that  the  drawer  has 
sustained  and  can  sustain  no  loss  or  damage  from  the  omission  to 
demand  payment,  at  an  earlier  date,  of  the  bank  or  banker  on  whom 
the  check  is  drawn."  "In  case  of  a  check,"  says  Judge  Story,  "the 
drawer  is  treated  as  in  some  sort  the  principal  debtor,  and  he  is  not 
discharged  by  any  laches  of  the  holder  in  not  making  due  presentment 
thereof,  or  in  not  giving'  him  notice  of  the  dishonor,  unless  he  has 
suffered  some  loss  or  injury  thereby,  and  then  only  pro  tanto."  Story 
on  Prom.  Notes,  492. 

The  same  doctrine  is  maintained  in  the  most  recent  decisions  of 
the  highest  courts  of  New  York.  Little  v.  Phenix  Bank,  2  Hill,  425. 
The  opinion  of  Judge  Cowen,  in  Harker  v.  Anderson,  21  Wend.  372, 
has  not  been  sustained.  In  a  word,  this  opinion  appears  to  prevail 
generally  both  in  England  and  in  the  United  States,  where  the  ques- 
tion has  arisen.  Alexander  v.  Burchfield,  3  Scott,  N.  R.  558;  Robinson 
V.  Hawkeford,  9  Q.  B.  52 ;  Byles  on  Bills,  14,  and  note  2. 

The  justice  and  policy  of  the  rule  are  sufficiently  obvious,  and  are 
forcibly  alluded  to  and  illustrated  by  Judge  Story,  in  his  opinion  in 
the  Matter  of  Brown,  2  Story,  516:  "If  the  drawee,  upon  the  pre- 
sentment, refuses  to  pay  the  check  because  he  has  no  funds,  then  the 
drawer  is  not  injured ;  and  if  he  has  funds,  and  refuses  to  pay,  then, 
if  the  bank  is  still  in  good  credit,  as  the  drawer  has  sustained  and  can 
sustain  no  loss,  there  is  every  reason  to  hold  him  liable  therefor. 
Every  check  is  prima  facie  presumed  to  be  given  for  value  received 
by  the  drawer;  and  if,  by  reason  of  the  want  of  due  presentment  or 
want  of  due  notice  of  the  dishonor,  he  is  to  be  totally  exonerated,  he 
pockets  both  the  original  consideration  and  his  funds  in  the  hands  of 
the  bank  or  banker.  In  such  a  case,  can  it  be  said,  with  truth  or  jus- 
tice, that  he  is  to  be  enriched  at  the  expense  of  the  holder  of  the  check? 
or  that  he  shall  not  be  deemed  to  hold  the  money  as  money  had  and 
received  for  the  use  of  the  holder,  either  because  he  had  no  funds 
in  the  bank  or  because  he  still  retains  those  funds  appropriated  to  the 
use  of  another  for  his  own  use?" 

The  argument  seems  to  be  conclusive.  Whether  it  is  not  just  as 
applicable  to  bills  of  exchange  is  another  question  not  necessary  to 
be  considered.    See  Edwards  on  Bills,  p.  396. 

In  the  case  of  St.  John  v.  Homans,  8  Mo.  382,  decided  by  this  court 
in  1844,  the  judgment  turned  upon  the  fact  of  a  loss  to  the  drawer  of 
the  check.  An  opinion  was  expressed  that  the  weight  of  authority 
recognized  no  distinction  between  the  degrees  of  diligence  required 
in  checks  and  bills  of  exchange  in  determining  the  responsibility  of 
the  drawer.  However  that  may  have  been  at  that  time,  the  current 
of  authority  now  is,  as  we  have  seen,  decidedly  the  other  way.    *    *    * 

Judgment  affirmed. 


CERTIFICATION 


II.  Certification 


257 


FIRST  NAT.  BANK  OF  JERSEY  CITY  v.  LEACH. 

(Court  of  Appeals  of  New  York,  1S73.     52  N.  Y.  350,  11  Am.  Rep.  708.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  tlic  First  Judicial  Department,  aUirming  a  judgment  in  favor  of 
defendant,  entered  upon  a  verdict. 

This  action_was_br£)Ught  upon  a  check  drawn  by  defendant.  The 
check  was  drawn  upon  the  Ocean  National  Bank,  was  dated  Novem- 
ber 21,  1871,  for  $1,410,  payable  on  the  12th  December,  1871,  to  the 
order  of  James  Dolby.  It  was  delivered  to  the  payee  and  discounted 
for  him  by  plaintiff.  At  11  o'clock  a.  m.  of  the  12th  December,  plain- 
tiff caused  the  same  to  be  presented  to  the  drawee  for  certification,  and 
it  was  certified  as  good.  The  drawer  had  at  that  time  on  deposit  suffi- 
cient to  pay  the  check,  and  the  amount  thereof  was  charged  to  him. 
Within  an  hour  or  two  thereafter  the  Ocean  National  Bank,  the 
drawee,  suspended,  and  a  receiver  was  appointed,  who  took  possession 
afterward.  Upon  the  same  day  the  check  was  presented  for  payment, 
and  payment  being  refused,  the  same  was  duly  protested. 

Upon  this  state  of  facts  the  court  directed  a  verdict  for  defendant, 
to  which  plaintiff's  counsel  duly  excepted.* 

PivCKHAM,  J.  The  defendant  drew  the  check  in  controversy,  it  was 
discounted  by  the  plaintiff,  and  on  the  day  it  was  due  it  was  presented 
by  plaintiff  to  the  drawee,  the  Ocean  Bank,  for  certification,  was  certi- 
fied as  good,  and  in  the  afternoon  of  the  same  day  was  presented  for 
payment,  which  was  refused,  because  between  the  time  of  its  certifi- 
cate and  its  second  presentment  the  drawee,  the  Ocean  Bank,  had 
failed  and  gone  into  the  hands  of  a  receiver.  Did  this  certification 
operate  as  a  payment  of  the  check  as  between  these  parties? 

The  theory  of  the  law  is  that,  where  a  check  is  certified  to  be  good 
by  a  bank,  the  amount  thereof  is  then  charged  to  the  account  of  the 
drawer  in  the  bank  certificate  account.  Every  well-regulated  bank 
adopts  this  practice  to  protect  itself. 

The  reason  therefor  is  so  strong  that  the  law  presumes  it  is  adopted 
by  the  banks.  Smith  v.  Miller,  43  N.  Y.  171,  3  Am.  Rep.  690;  Meads 
V.  Merchants'  Bank  of  Albany,  25  N.  Y.  148,  82  Am.  Dec.  331 ;  Farm- 
ers' &  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank,  16  N.  Y.  125, 
69  Am.  Dec.  678 ;  Merchants'  Bank  v.  State  Bank,  10  Wall.  647,  19 
L.  Ed.  1008.    It  is  found  to  have  been  done  in  this  case. 

3  For  discussion  of  principles,  see  Norton  on  Bills  and  Notes  (4tli  Ed.)  §§ 
153-155. 

*  Tlie  arguments  of  counsel  are  omitted. 

Moore  Cases  B.&  N. — 17 


258  CHECKS 

If  a  bank  failed  to  keep  such  account  and  to  make  such  entries,  it 
would  necessarily  incur  the  peril  of  the  failure  of  its  customers  whose 
checks  it  certified,  without  any  account  of  their  number  or  amount,  al- 
though it  would  be  liable  to  pay  its  certified  checks  to  bona  fide  holders, 
whether  it  had  funds  or  not.  Farmers'  &  ]\Iech.  Bank  v.  Butchers'  & 
Drovers'  Bank,  supra. 

It  follows  that,  after  a  check  is  certified,  the  drawer  of  the  check 
cannot  draw  out  the  funds  tlien  in  the  bank  necessary  to^meet  the  cer- 
tified check.    That  money  is  no  longer  his. 

If  he  apprehended  danger  from  the  suspected  failure  of  the  bank, 
he  could  not  draw  out  that  money,  because  it  had  already  been  appro- 
priated by  means  of  the  check  thus  certified;  as  to  him,  it  was  pre- 
cisely as  if  the  bank  had  paid  the  money  upon  that  check  instead  of 
making  a  certificate  of  its  being  good. 

For  that  reason,  the  drawer  could  have  no  remedy  against  the  bank, 
by  any  legal  proceeding,  to  secure  himself  for  the  amount  of  that 
check.  Hence,  if  the  drawer  should  get  the  check  back,  he  would 
strictly  be  entitled  to  get  that  money,  not  by  virtue  of  his  original  de- 
posit, but  solely  by  surrender  of  the  certified  check,  like  any  other 
holder. 

But  all  that  has  been  yet  stated  applies  with  equal  force  to  the  ac- 
ceptance of  a  time  bill  of  exchange  before  due.  Theni,  when  the  drawee 
accepts,  it  is  an  appropriation  of  the  funds,  pro  tanto,  for  the  service 
and  use  of  the  payee  or  other  person  holchng  the  bill,  so  that  the 
amount  ceases  henceforth  to  be  the  money'of  the  drawer,"  and  becomes 
that  of  the  payee  or  other  holder  in  the  hands  of  the  acceptor.  Story 
on  Bills  of  Ex.  §  14;  1  Pars,  on  Notes  and  Bills,  323. 

It  is  entirely  clear  that  the  acceptance  of  a  time  draft,  before  due, 
does  not  operate  as  a  payment  as  respects  the  drawer.  Its  only  effect 
is  to  make  the  acceptor  tlie  primary  party  to  pay  the  draft. 

But  the  parties  to  a  certified  check,  due  when  certified,  occupy  a 
different  position.  There  the  money  is  due  and  payable  when  the  check 
is  certified.  The  bank  virtually  says :  "That  check  is  good ;  we  have 
the  money  of  the  drawer  here  ready  to  pay  it ;  we  will  pay  it  now,  if 
you  will  receive  it."  The  holder  says :  "No,  I  will  not  take  the  mon- 
ey; you  may  certify  the  check  and  retain  the  money  for  me  until  this 
check  is  presented." 

The  law  will  not  permit  a  check,  when  due,  to  be  thus  presented,  and 
the  money  to  be  left  with  the  bank  for  the  accommodation  of  the  hold- 
er, without  discharging  the  drawer. 

The  money  being  due  and  the  check  presented,  it  is  his  own  fault 
if  the  holder  declines  to  receive  the  pay,  and  for  his  own  convenience 
has  the  money  appropriated  to  that  check,  subject  to  its  future  pre- 
sentment at  any  time  within  the  statute  of  limitations. 

The  acceptance  of  a  time  draft  before  due  is  entirely  different ;  there 
the  holder  has  then  no  right  to  the  money,  and  the  acceptor  no  author- 


CERTIFICATION  259 

ity  to  pay  until  the  maturity  of  the  bill.  There  is  no  necessity  for  pre- 
senting a  check  for  acceptance,  like  a  time  bill,  no  authority  for  such 
presentment,  although  the  holder  has  the  right  to  do  it.  The  authority 
and  the  duty  are  to  present  for  payment. 

If,  however,  the  holder  choose  to  have  it  certified  '  ;d  of  j)aid, 
he  will  clo  so  at  the  pcrilJonjIs^hi^rgTnj^thc  drgjyer. 

He  cannot  change  the  position  and  increase  the  risk  of  the  drawer 
without  discharging  him.    Smith  v.  Miller,  supra. 

This  would  not  discharge  the  drawer  of  a  check,  who  himself  pro- 
cured it  to  be  certified  and  then  put  it  in  circulation.  The  reason  of 
the  rule  fails  to  apply  to  him  in  such  case. 

I  am  not  aware  of  any  direct  authority  upon  this  question ;  but  upon 

principle  it  must  be  held  that  the  bank  holds  the  money,  after  certifi- 

cg,tion  to  the  holder,  not  at  t^  risk  of  the  drawer,  but  of  the  holder 

of  the  check^^_^ 

"  The  judgment  must  be  affirmed. 


BORN  V.  FIRST  NAT.  BANIC 

(Supreme  Court  of  Indiana,  1890.     123  Ind.  78,  24  N.  E.  173,  7  L.  R.  A.  442,  18 

Am.  St.  Rep.  312.) 

Elliott,  J.  On  the  30th  day  of  January,  1886,  the  appellant  was 
indebted  to  the  appellee,  and  after  12  o'clock  noon  of  that  day  he  de- 
livered to  it  a  certifi£jd  check  drawn  by  him  on  Ritzinger's  Bank,  in 
which  bank  he  then  had  money  on  deposit,  The  banks  of  the  city  of 
Indianapolis  had  a  long-established  rule  requiring  all  checks  presented 
after  12  o'clock  noon  to  be  certified  by  the  bank  upon  which  they  were 
drawn,  and  it  was  the  well-known  custom  of  such  banks  to  immediately 
charge  the  checks  certified  by  them  against  the  depositor.  This  was 
done  in  this  instance,  and  the  amount  of  the  check  was  set  aside  for 
the  purpose  of  paying  it.  Ritzinger's  Bank  suspended  payment,  and 
made  a  voluntary  assignment  for  the  benefit  of  creditors,  prior  to  the 
business  hours  of  the  first  day  after  the  check  was  delivered  to  the 
appellee. 

We  .agree  with  the  appellant's  counsel  that  the  drawer  of  a  check 
is  released  TF  the  "holder,, insteiid  of  presenting  it  for  payment  himself, 
procures  it  to  be  certified  by  the  bank  upon  which  .it  is  drawn.  If  the 
holder  elects  to  procure  the  certification  of  the  check,  it  becomes,  in 
his  hands,  substantially  a  certificate  of  deposit.  By  his  own  act  he 
makes  the  bank  his  debtor,  and  releases  the  drawer  of  the  check.  The 
reason  for  this  rule  is  that  the  moment  the  check  is  certified  the  funds 
cease  to  be  under  the  control  of  the  original  depositor,  and  pass  under' 
the  control  of  the  person  who  procures  the  certification  of  the  check 
drawn  in  his  favor.    First  Nat.  Bank  v.  Leach,  52  N.  Y.  350,  11  Am. 


2G0  CHECKS 

Rep.  70S ;  Thomson  v.  Bank,  etc.,  82  X.  Y.  1 ;  Girard  Bank  v.  Bank 
of  Penn.  Tp.,  39  Pa.  92,  80  Am.  Dec.  507 ;  Freund  v.  Importers',  etc., 
Bank,  76  N.  Y.  352.  It  is  true  that  the  bank  by  which  the  check  is 
certified  becomes  bound  for  its  payment,  and  that  it  cannot  defeat  the 
right  of  the  holder  upon  the  ground  that  the  drawer  has  no  funds  on 
deposit.    Espy  v.  Bank  of  Cincinnati,  18  Wall.  604,  21  L.  Ed.  947. 

But  it  is  very  clear  that  the  authorities  to  which  we  have  referred 
do  not  directly  rule  this  case,  for  here  the  holder  did  not  procure  the 
certification  of  the  check.  All  that  it  did  was  to  accept  the  check  in 
the  ordinary  course  of  business.  Nor  do  we  regard  this  case  as  within 
the  sweep  of  the  reasoning  of  the  courts  in  the  cases  to  which  refer- 
ence has  been  made.  Here  the  holder  accepted  the  check  as  it  was  of- 
fered, and  did  nothing  to  make  the  drawee  its  debtor.  The  principle 
which  gives  force  and  strength  to  the  decisions  referred  to  fails  en- 
tirely where  there  is  no  act  done  by  the  holder  of  the  check  save  that 
of  receiving  it  in  the  form  in  which  it  is  presented;  for  the  element 
which  sustains  those  decisions  is  that  the  holder,  by  procuring  the  cer- 
tification of  the  check  after  he  becomes  the  owner,  voluntarily  makes 
the  bank  upon  which  it  is  drawn  his  debtor,  thus  releasing  the  drawer. 
It  is,  in  such  a  case,  the  holder's  own  act  that  changes  the  relation  and 
situation  of  the  parties. 

The  certification  of  a  check  does  not  completely  change  its  char- 
acter; on  the  contrary,  it  changes  it  only  in  one  particular,  although 
the  change,  it  is  true,  does  produce  a  difference  in  the  relation  of  the 
original  parties,  inasmuch  as  the  drawee  ceases  to  be  the  debtor  of  the 
drawer  for  the  amount  represented  by  the  check.  But  this  is  the  ex- 
tent of  the  change  in  the  situation  of  the  respective  parties  in  all  cases 
where  the  certification  is  not  procured  by  the  holder  of  the  check  after 
it  passes  into  his  hands.  It  remains  an  order  for  the  payment  of  mon- 
ey, and  the  certification,  when  made  before  delivery,  operates  in  favor 
of  third  parties  simply  as  an  assurance  that  it  is  genuine,  and  will  be 
paid.  The  bank  that  certifies  it  becomes  bound,  but  beyond  this- noth- 
ing is  added  to  the  legal  force  or  effect  of  the  instrument,  except,  as 
we  have  said,  in  cases  where  the  holder  himself  procures  its  certifica- 
tion. 

The  party  who  accepts  a  certified  check  in  the  usual  course  of  busi- 
ness is  not  bound  to  take  the  risk  of  the  solvency  of  the  bank  upon 
which  it  is  drawn.  Pie  is  bound  only  to  do  what  the  law  requires,  and 
that  is  to  promptly  and  seasonably  present  the  check  for  payment.  A 
party  to  whom  a  debt  is  owing  has  a  right  to  demand  payment  of  his 
claim  in  money ;  for,  in  the  absence  of  an  express  agreement,  payment 
can  only  be  made  in  money.  Plancock  v.  Yaden,  121  Ind.  366,  23  N. 
E.  253,  6  L.  R.  A.  576,  16  Am.  St.  Rep.  396.  In  accepting  a  check  in- 
stead of  money,  the  creditor  dispenses  with  the  necessity  of  payment 
in  the  legal  mode,  and  the  reasonable  implication  is  that  the  check  shall 


CERTIFICATION 


261 


be  a  payment  only  in  the  event  that  it  is  honored  on  presentation.  To 
hold  otherwise  would,  as  the  Supreme  Court  of  the  United  States  has 
suggested,  seriously  interfere  with  commercial  and  financial  transac- 
tions, and  break  down  an  established  system.  Merchants'  Bank  v. 
State  Bank,  10  Wall.  604,  19  L.  Ed.  1008.  Nor  is  there  any  rule  of 
law  which  requires  it  to  be  so  held.  The  analogies  are,  indeed,  the 
other  way ;  for,  as  only  money  is  payment  where  there  is  no  express 
agreement,  there  is  no  suflicient  reason  for  inferring  that  an  order  for 
money,  although  accepted,  is  money,  or  has  the  same  effect  as  money. 
A  ioank  upon  which  a  check  is  drawn  is  not  liable  upon  the  check 
unless  it  is  certified  as  good.  Harrison  v.  Wright,  100  Ind.  515,  58 
Am.  Rep.  805.  The  certification  fixes  the  liability  of  the  bank,  but 
it  docs  no  more.  It  does  not  change  the  situation  of  the  party  who 
takes  the  check,  nor  does  it  make  the  check  money.  As  it  is  not  money, 
but  is  simply  an  accepted  order  for  money,  it  does  not,  of  its  own  force 
and  vigor,  operate  as  money.  A  certified  check  cannot  take  the  place 
of  money  without  an  express  agreement  to  that  effect,  and  therefore, 
cannot  by  its  own  intrinsic  force  operate  as  payment.  To  make  it  a 
payment,  something  must  be  added;  and  that  something  must  be  an 
agreement,  express  or  implied,  that  it  shall  be  regarded  as  money,  the 
legal  medium  of  payment. 

The  obvious  purpose  of  certifying  checks  is  to  assure  the  persons  to 
whom  they  are  offered  that  they  are  genuine,  and  will  be  paid;  not 
that  the  bank  that  certifies  them  is  solvent.     There  is  nothing  in  the 
nature  of  the  transaction  that  suggests,  in  the  faintest  degree,  that  cer- 
tification is  evidence  of  the  solvency  and  ability  of  the  drawee.     It  is 
perfectly  clear  that  the  certification  of  a  check  means  simply  that  the 
bank  upon  which  it  is  drawn  will  honor  it,  and  there  is  no  reason  for 
implying  that  one  who  receives  it  in  the  usual  course  of  business  does 
so  upon  the  faith  that  the  certification  implies  that  the  bank  is  both 
willing  and  able  to  pay  it.    The  certification  is  not  intended  to  convey 
information  as  to  the  solvency  of  the  bank.     None  of  the  parties  can 
be  regarded  as  giving  it  that  force ;  and,  if  not,  then  it  cannot  be  in- 
ferred that  any  of  them  agreed  that  the  certification  of  the  check  im- 
pressed it  with  the  character  of  money.    We  suppose  that  no  one  who 
accepts  a  certified  check  gives  a  thought  to  the  question  of  the  solvency 
of  the  bank  upon  which  it  is  drawn  other  than  such  as  he  would  give 
if  there  were  no  certification;  for  it  would  be  unnatural  and  unrea- 
sonable to  do  so,  inasmuch  as  the  certification  is,  in  terms  and  in  im- 
plication, no  more  than  an  agreement  that  the  check  will  be  paid  on 
presentation.     It  neither  represents  nor  touches  the  question  of  the 
solvency  of  the  bank  upon  which  it  is  drawn.     There  is,  therefore,  no 
just  reason  for  concluding  that  the  party  who  takes  a  certified  check 
in  the  ordinary  course  of  business  assumes  the  risk  of  solvency  of 
the  bank  chosen  by  the  drawer  of  the  check  as  his  place  of  deposit. 
The  fair  and  reasonable  implication  is  that  the  party  who  selects  for 


2G2  CHECKS 

himself  the  bank  which  he  will  trust  with  his  money  assumes  the  risk 
of  its  solvency. 

The  certification  of  a  check  is  not  intended  to  convey  to  the  person 
to  whom  it  is  offered  an  assurance  that  the  bank  upon  which  it  is  drawn 
is  solvent;  for  there  is, nothing  in  the  nature  of  the  transaction,  nor 
in  the  form  of  the  contract,  which  authorizes  the  inference  that  any  of 
the  parties  expected,  or  intended,  that  it  should  have  that  effect.  It 
cannot,  therefore,  be  implied  that  the  acceptance  of  the  check  by  the 
creditor,  ipso  facto,  released  the  drawer,  and  imposed  upon  the  cred- 
itor the  risk  of  the  solvency  of  the  bank  by  which  the  check  was  cer- 
tified. 

It  is,  and  long  has  been,  settled  law  that  an  ordinary  check  does  not 
constitute  payment.  This  doctrine  is  so  well  settled  that  it  is  unneces- 
sary to  refer  to  the  authorities.  Accepting,  as  we  must,  this  rule  as 
obligatory,  we  cannot  conclude  that  a  certified  check  constitutes  pay- 
ment, unless  we  assume  that  the  certification  makes  it  the  equivalent 
of  money  as  a  medium  of  payment.  But  neither  in  principle  nor  au- 
thority is  there  to  be  found  warrant  for  this  assumption;  for,  as  we 
have  seen,  the  nature  of  a  check  is  not  changed  by  certification,  except 
in  the  one  particular  already  indicated.  As  there  is  no  other  change, 
it  is  logically  impossible  that  the  effect  of  that  change  can  make  the 
check  the  equivalent  of  money. 

From  whatever  point  of  view  the  question  is  examined,  it  appears 
clear  that  there  is  no  release  of  the  drawer  of  the  check  unless  there  is 
either  an  express  or  an  implied  agreement  to  that  effect. 

There  is  scant  authority  upon  the  direct  question.  The  reason  for 
this  barrenness  is  that  the  use  of  certified  checks  is  of  modern  origin. 
But,  scarce  as  the  authorities  are,  our  conclusion  that  a  certified  check 
does  not  of  its  own  force  and  vigor  operate  as  a  payment,  is  not  with- 
out support  from  the  decided  cases.  In  Bickford  v.  First  Nat.  Bank, 
42  111.  238,  89  Am.  Dec.  436,  it  was  expressly  decided  that  a  certified 
check  does  not  constitute  payment.  To  the  same  effect  are  the  decisions 
in  Rounds  v.  Smith,  42  111.  245  ;  Brown  v.  Leckie,  43  111.  497 ;  Mutual 
Nat.  Bank  v.  Rotge,  28  La.  Ann.  933,  26  Am.  Rep.  126;  Andrews  v. 
Bank,  9  Heisk.  (Tenn.)  211,  24  Am.  Rep.  300.  The  question  received 
consideration  in  the  recent  case  of  Larsen  v.  Breene,  12  Colo.  480,  21 
Pac.  498,  and  it  was  held  that  a  certified  check  was  not  a  payment. 
This  general  doctrine  is  asserted  by  Mr.  Tiedeman,  who  says :  "And 
the  same  rule  applies  although  the  check  had  been  certified  before  its 
delivery  to  the  payee  or  holder ;  the  certification  only  having  the  effect 
in  that  case  of  increasing  its  currency  by  adding  the  liability  of  the 
bank  to  that  of  the  drawer."    Tiedeman  Com.  Paper,  §  456. 

There  was  no  substitution  of  one  debtor  for  another,  in  this  instance, 
and  the  contention  of  appellant's  counsel  that  there  was  a  novation 
cannot  prevail.  The  delivery  of  the  check  was  simply  a  conditional 
payment.    The  release  of  the  original  debtor  was  dependent  upon  the 


CERTIFICATION 


263 


condition  that  thc_chcck  should  be  honored  on  presentation.     He  still 
remainedlhe~dcbtor,  for  lie  was  bound  for  the.  debt  as  long  as  the 
check  remameii.  unpaid..    Culver  v.  Marks,   122  Ind.  554,  23  N.  E. 
1086,  7  L.R.  A.  489.  17  Am.  St.  Rep.  377. 
Judgment  affirmed. 


///)  /7/^/ 


irE3T  P0BLI8HIN9  Ca,  PB1NTBB8,  BT.  PAUL,  MIlflL 


LOS  A^GELKiJ 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 

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